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NOTE:
1. THIS IS A DRAFT BUSINESS RESCUE PLAN, BASED ON A RESTRUCTURED SAA PROPOSAL,
WHICH IS STILL IN THE PROCESS OF BEING SUPPLEMENTED WITH FURTHER INFORMATION
(INDICATED IN THE BODY OF THIS DOCUMENT WITH DRAFTING NOTES) AND WHICH IS
ALSO SUBJECT TO CONSULTATION.
2. IN PARTICULAR, THE BRPs:
2.1. ARE IN THE PROCESS OF OBTAINING VALUATIONS OF THE COMPANY’S ASSETS,
WHICH WILL BE INSERTED AND ATTACHED TO THIS DOCUMENT.
2.2. WILL PROVIDE FURTHER INFORMATION IN THIS DOCUMENT DETAILING THE
RESTARTING OF THE AIRLINE PURSUANT TO THE OUTBREAK OF COVID-19.
2.3. WILL PROVIDE THE COMPLETE LIST OF ANNEXURES TO THIS DOCUMENT AT A
LATER STAGE.
3. THIS DRAFT BUSINESS RESCUE PLAN IS FOR DISCUSSION PURPOSES AND MAY NOT BE
CIRCULATED TO ANY OTHER PARTY.
2
(Registration No. 1997/022444/30)
(in business rescue)
BUSINESS RESCUE PLAN Prepared in terms of section 150 of the Companies Act No. 71 of 2008 (as amended)
Prepared by:
SIVIWE DONGWANA
(joint business rescue practitioner)
and
LESLIE MATUSON
(joint business rescue practitioner)
PUBLICATION DATE: []
TABLE OF CONTENTS
Paragraph number and description Page
1. INTERPRETATION AND PRELIMINARY .................................................................................................. 3
2. ACTION TO BE TAKEN BY AFFECTED PERSONS .............................................................................. 12
3. STRUCTURE OF THE PLAN ................................................................................................................... 12
PART A – BACKGROUND .............................................................................................................................. 13
4. COMPANY INFORMATION ..................................................................................................................... 13
5. COMPANY BACKGROUND .................................................................................................................... 15
6. SUMMARY OF THE BUSINESS RESCUE.............................................................................................. 19
7. STEPS TAKEN SINCE THE APPOINTMENT OF THE BRPS ................................................................ 20
8. MARKET CONDITIONS AND TRADING FOLLOWING THE COMMENCEMENT DATE ...................... 45
9. MATERIAL ASSETS AND SECURITY OF THE COMPANY AS AT THE COMMENCEMENT DATE.... 51
10. CREDITORS OF THE COMPANY AS AT THE COMMENCEMENT DATE ........................................ 52
11. CREDITORS VOTING INTEREST AND VOTING BY PROXY ............................................................ 52
12. PROBABLE DIVIDEND ON LIQUIDATION .......................................................................................... 53
13. HOLDERS OF THE COMPANY’S ISSUED SECURITIES................................................................... 54
14. THE PRACTITIONERS’ REMUNERATION ......................................................................................... 54
15. STATEMENT ABOUT WHETHER THE BUSINESS RESCUE PLAN INCLUDES A PROPOSAL
MADE INFORMALLY BY A CREDITOR ......................................................................................................... 54
PART B – PROPOSALS.................................................................................................................................. 55
16. PURPOSE AND OBJECTIVE OF BUSINESS RESCUE ..................................................................... 55
17. SUMMARY OF THE PROPOSAL IN TERMS OF THIS BUSINESS RESCUE PLAN ......................... 55
18. THE PROPOSED RESTRUCTURE ..................................................................................................... 57
19. GOVERNMENT APPROPRIATION AND FUNDING ........................................................................... 60
20. RECEIVERSHIP ................................................................................................................................... 69
21. EFFECT ON CREDITORS ................................................................................................................... 65
22. EFFECT ON EMPLOYEES .................................................................................................................. 67
23. EFFECT OF THE BUSINESS RESCUE PLAN ON THE HOLDERS OF EACH CLASS OF THE
COMPANY'S ISSUED SHARES ..................................................................................................................... 68
24. COMPARISON OF THE BUSINESS RESCUE TO LIQUIDATION ..................................................... 68
25. ORDER OF DISTRIBUTION – PAYMENT WATERFALL IN BUSINESS RESCUE & RECEIVERSHIP
69
26. PROOF OF CLAIMS BY CREDITORS................................................................................................. 72
27. MORATORIUM ..................................................................................................................................... 55
28. BENEFITS OF ADOPTING THE BUSINESS RESCUE PLAN COMPARED TO LIQUIDATION ........ 72
29. RISKS OF THE BUSINESS RESCUE .................................................................................................. 74
30. ASSUMPTIONS MADE WITH REGARD TO FORECAST OF THE BUSINESS RESCUE DIVIDEND 75
PART C – ASSUMPTIONS AND CONDITIONS ............................................................................................. 77
31. CIRCUMSTANCES IN WHICH THE BUSINESS RESCUE PLAN WILL END AND THE DURATION
OF BUSINESS RESCUE................................................................................................................................. 77
32. CONDITIONS FOR THE BUSINESS RESCUE PLAN TO COME INTO OPERATION AND BE FULLY
IMPLEMENTED ............................................................................................................................................... 77
33. EFFECT OF THE BUSINESS RESCUE PLAN ON EMPLOYEES ...................................................... 77
34. PROJECTED BALANCE SHEET AND PROJECTED STATEMENT OF INCOME AND EXPENSES
PREPARED ON THE ASSUMPTION THAT THE BUSINESS RESCUE PLAN IS ADOPTED ...................... 78
35. EXISTING LITIGATION ........................................................................................................................ 78
36. DISPUTE RESOLUTION ...................................................................................................................... 78
37. ABILITY TO AMEND THE BUSINESS RESCUE PLAN ...................................................................... 80
38. SEVERABILITY .................................................................................................................................... 80
39. CONCLUSION ...................................................................................................................................... 80
40. BRPS' CERTIFICATE ........................................................................................................................... 80
Annexure A: List of the material assets of the Company
Annexure B: List of the Creditors of the Company
Annexure [] : Steps Plan
Annexure [] : Income statement, balance sheet and cash flow
Annexure [] :
Annexure [] :
1. INTERPRETATION AND PRELIMINARY
The headings of the paragraphs in this Business Rescue Plan are for the purpose of convenience and
reference only and shall not be used in the interpretation of nor modify nor amplify the terms of this
Business Rescue Plan nor any paragraph hereof. Unless a contrary intention clearly appears:
1.1. words importing –
1.1.1. any one gender includes the other gender;
1.1.2. the singular includes the plural and vice versa; and
1.1.3. persons include natural persons, created entities (incorporated and un-
incorporated and the State) and vice versa,
1.2. the following terms and/or expressions shall have the meanings assigned to them hereunder
and cognate expressions shall have corresponding meanings –
1.2.1. “Absa” means Absa Bank Limited (acting through its Corporate and Investment
Banking division), Registration No. 1986/004794/06, a company incorporated in
accordance with the laws of South Africa;
1.2.2. “Adamantem” means Adamantem (Pty) Limited, Registration
No. 2017/292632/07, a company incorporated in accordance with the laws of
South Africa;
1.2.3. “Adoption Date” means the date upon which the Business Rescue Plan is
approved in accordance with section 152(2), read with section 152(3)(b) and
section 152(3)(c)(ii)(aa), of the Companies Act;
1.2.4. “Advisors” means the advisors to the BRPs, namely Matuson & Associates,
Adamantem, Alvarez & Marsal Europe Limited, PricewaterhouseCoopers
Advisory Services (Pty) Limited and Edward Nathan Sonnenbergs Inc., and their
respective employees or representatives;
1.2.5. “Affected Person” or “Affected Persons” shall bear the meaning ascribed
thereto in section 128(1)(a) of the Companies Act, being shareholders, creditors,
employees of the Company and the registered trade unions representing
employees of the Company;
1.2.6. “Air Chefs” means Air Chefs SOC Limited, Registration No. 1990/006277/30, a
state owned company incorporated in accordance with the laws of South Africa;
1.2.7. “Ashburton” means [];
1.2.8. “BRPs” means the joint business rescue practitioners of the Company, appointed
in terms of section 129(3)(b) of the Companies Act, being Dongwana and
Matuson, and shall include a reference to “Receivers” as the context requires in
this Business Rescue Plan;
1.2.9. “Business” means the business of the Company from time to time including, inter
alia:
1.2.9.1. operating as a national airline carrier, providing passenger and cargo
transport services, over various domestic, regional and international
routes;
1.2.9.2. operating the Divisions; and
1.2.9.3. the holding of shares in the following wholly owned subsidiaries
(whose businesses are more fully described in paragraph [5.5]):
1.2.9.3.1. Mango;
1.2.9.3.2. SAA Technical;
1.2.9.3.3. Air Chefs; and
1.2.9.3.4. SACC.
1.2.10. “Business Day” means any day other than a Saturday, Sunday or official public
holiday in South Africa;
1.2.11. “Business Rescue” means proceedings to facilitate the rehabilitation of the
Company, which is financially distressed, as more fully defined in section
128(1)(b) of the Companies Act and paragraph [] herein;
1.2.12. “Business Rescue Costs” means the remuneration and expenses of the BRPs
and other claims arising out of the costs of the Business Rescue, including the
costs of the Advisors;
1.2.13. “Business Rescue Plan” means this document together with all of its annexures,
as amended from time to time, and prepared in accordance with section 150 of
the Companies Act;
1.2.14. “CCMA” means the Commission for Conciliation, Mediation and Arbitration
established in terms of section 112 of the LRA;
1.2.15. “CIPC” means the Companies and Intellectual Property Commission, established
in terms of section 185 of the Companies Act;
1.2.16. “Claims” means Pre-commencement Claims and Post-commencement Claims;
1.2.17. “Commencement Date” means 5 December 2019, being the date upon which
Business Rescue commenced in accordance with section 129(1), read with
section 132(1)(a)(i), of the Companies Act;
1.2.18. “Company” means South African Airways SOC Limited, Registration
No. 1997/022444/30, a state owned company incorporated in accordance with
the laws of South Africa, at present under Business Rescue;
1.2.19. “Companies Act” means the Companies Act, No. 71 of 2008, as amended;
1.2.20. “Concurrent Allocation” means an amount of [] allocated to payment of the
General Concurrent Creditors, as more fully dealt with in paragraph [];
1.2.21. “Concurrent Creditors” means all unsecured Pre-commencement Creditors;
1.2.22. “Conditions” means the conditions which must be satisfied for the business
rescue plan to come into full operation and to be fully implemented, as
contemplated in section 150(c)(i) of the Companies Act, more fully dealt with in
paragraph [];
1.2.23. “Contracts” means those contracts entered into by the Company and third
parties, either prior to or after the Commencement Date;
1.2.24. “Creditors” means Pre-commencement Creditors and Post-commencement
Creditors;
1.2.25. “Creditors’ Committee” means the committee formed in terms of section 145(3)
of the Companies Act;
1.2.26. “DBSA” means the Development Bank of Southern Africa, Registration No. [], a
public entity established in terms of the Development Bank of
Southern Africa Act, No. 13 of 1997;
1.2.27. “Disputed Claims” means any and all Claims which are disputed by the BPRs,
including Pre-commencement Claims which may have been lodged by Pre-
commencement Creditors and whose Pre-commencement Claims have been
rejected either in whole or in part by the BRPs or Receivers, and which dispute
shall be determined in favour of or against such Creditors in terms of the Dispute
Mechanism contained in paragraph [];
1.2.28. “Distribution/s” means distributions to be made to Creditors by the BRPs and/or
the Receivers;
1.2.29. “DPE” means the Department of Public Enterprises of South Africa;
1.2.30. “Dongwana” means Siviwe Dongwana, the joint business rescue practitioner
appointed by the Company in terms of section 129(2)(b) of the Companies Act;
1.2.31. “Employees” means employees of the Company;
1.2.32. “Employees’ Committee” means the committee formed in terms of
section 144(3)(c) of the Companies Act and also for the purposes of consulting
with the Employees in terms of section 189(3), read together with section 189A,
of the LRA;
1.2.33. “ENSAfrica” means Edward Nathan Sonnenbergs Incorporated, attorneys
practising as such at 129 Rivonia Road, the Marc, Tower 2, Sandown, Sandton;
1.2.34. “Financially Distressed” shall bear the meaning ascribed thereto in
section 128(1)(f) of the Companies Act;
1.2.35. “Final Claims Date” means the final date for the filing of Pre-commencement
Claims, being [];
1.2.36. “FirstRand” means FirstRand Bank Limited (acting through its Rand Merchant
Bank division), Registration No. 1929/001225/06, a company incorporated in
accordance with the laws of South Africa;
1.2.37. “General Concurrent Creditors” means the Pre-commencement Creditors
excluding the Lenders;
1.2.38. “General Concurrent Dividend” means the guaranteed dividend of [] ([]) cents
in the Rand payable to the General Concurrent Creditors if this Business Rescue
Plan is adopted and the Proposed Restructure is fully implemented, as more fully
dealt with in paragraph [];
1.2.39. “Government” means the Government of the Republic of South Africa;
1.2.40. “Guarantees” means the guarantees issued by Government in favour of the
Lenders for the obligations of the Company, more fully dealt with in paragraph [];
1.2.41. “IAM” means Investec Asset Management, Registration No. [], a company
incorporated in accordance with the laws of South Africa;
1.2.42. “IATA” means the International Air Transport Association, incorporated in terms
of an Act of the Canadian Parliament;
1.2.43. “Insolvency Act” means the Insolvency Act No. 24 of 1936, as amended;
1.2.44. “Investec” means Investec Bank Limited, Registration No. 1969/004763/06, a
company incorporated in accordance with the laws of South Africa;
1.2.45. “Lenders” means the Pre-commencement Lenders and PCF Lenders;
1.2.46. “Lessors” means the lessors of aircraft to the Company, as more fully dealt with
in [];
1.2.47. “LRA” means the Labour Relations Act, No. 66 of 1995, as amended;
1.2.48. “Management” means members of the Company’s board and/or pre-existing
management as at the Commencement Date;
1.2.49. “Mango” means Mango Airlines SOC Limited, Registration No. 2006/018129/30,
a state owned company incorporated in accordance with the laws of South Africa;
1.2.50. “Matuson” means Leslie Matuson, the joint business rescue practitioner
appointed by the Company in terms of section 129(2)(b) of the Companies Act;
1.2.51. “Matuson & Associates” means Matuson & Associates (Pty) Limited,
Registration No. 2009/008967/07, a company incorporated in accordance with
the laws of South Africa;
1.2.52. “Momentum” means [];
1.2.53. “National Treasury” means the Department of the National Treasury of
South Africa;
1.2.54. “Nedbank” means Nedbank Limited, Registration No. 1951/000009/06, a
company incorporated in accordance with the laws of South Africa;
1.2.55. “New HoldCo” means the new holding company to be established as a
State Owned Company by Government in terms of the Proposed Restructure;
1.2.56. “NPE” means a national public entity established in terms of the PFMA;
1.2.57. “Notice of Meeting” means the notice of the meeting to consider the Business
Rescue Plan delivered to all Affected Persons as contemplated in terms of
section 151(2) of the Companies Act;
1.2.58. “PCF” means post-commencement finance as contemplated in section 135 of the
Companies Act;
1.2.59. “PCF Bank Lenders” means Absa, FirstRand, Investec, Nedbank and Standard
Bank;
1.2.60. “PCF Lenders” means DBSA and the PCF Bank Lenders;
1.2.61. “PFMA” means the Public Finance Management Act, No. 1 of 1999, as amended;
1.2.62. “Post-commencement Claims” means any claim against the Company, the
cause of action in respect of which arose after the Commencement Date;
1.2.63. “Post-commencement Creditors” means all persons, including legal entities
and natural persons, having Post-commencement Claims, excluding the PCF
Lenders;
1.2.64. “Pre-commencement Claims” means any claim against the Company, the
cause of action which arose prior to the Commencement Date;
1.2.65. “Pre-commencement Creditors” means all persons, including legal entities and
natural persons, having Pre-commencement Claims;
1.2.66. “Pre-commencement Lenders” means Absa, FirstRand, Investec, Nedbank,
Standard Bank, IAM, Ashburton, Sanlam and Momentum;
1.2.67. “Proposed Restructure” means the restructure proposed by the BRPs, as more
fully dealt with in paragraph [];
1.2.68. “Publication Date” means the date on which this Business Rescue Plan is
published to Affected Persons in terms of section 150(5) of the Companies Act,
being [] 2020;
1.2.69. “Rand” or “R” or “ZAR” means the lawful currency of South Africa;
1.2.70. “Receivers” means the receivers to be appointed in terms of paragraph [], being
Dongwana and Matuson;
1.2.71. “Receivership” means the process which will commence on the Substantial
Implementation Date, more fully dealt with in paragraph [];
1.2.72. “Receivership Administration Expenses” means the remuneration and
expenses of the Receivers and other claims arising out of the costs of the
Receivership;
1.2.73. “Receivership Proceeds” means the Restructure Proceeds, the proceeds
received from any recovery or related process instituted by the BRPs and/or the
Receivers and any additional proceeds to be included in the Receivership
Proceeds in terms of the Business Rescue Plan;
1.2.74. “Restructure Proceeds” means the proceeds received by the Company or value
attributed to the Transfer Shares or the transfer of any other asset in terms of the
Proposed Restructure, as more fully dealt with in paragraph [];
1.2.75. “SA Airlink” means SA Airlink (Pty) Limited, Registration No. 1969/002554/07, a
company incorporated in accordance with the laws of South Africa;
1.2.76. “SAA Cargo” means the division of the Company which operates as an airfreight
service provider;
1.2.77. “SAA Lounges” means the division of the Company which operates as a lounge
service provider to premium passengers;
1.2.78. “SAA Technical” means SAA Technical SOC Limited, Registration
No. 1999/024058/30, a state owned company incorporated in accordance with
the laws of South Africa;
1.2.79. “SAA Voyager” means the division of the Company which operates the
Company’s loyalty programme;
1.2.80. “SAA Restructure” means the proposed restructure of the Business of the
Company, as more fully dealt with in paragraph [];
1.2.81. “SACC” means South African Airways City Centre SOC Limited, Registration
No. 1997/003282/30, a state owned company incorporated in accordance with
the laws of South Africa;
1.2.82. “SA Express” means South African Express Airways SOC Limited (in business
rescue), Registration No. 1990/007412/30, a state owned company incorporated
in accordance with the laws of South Africa;
1.2.83. “Sanlam” means [], Registration No. [], a company incorporated in accordance
with the laws of South Africa;
1.2.84. “Secured Creditors” means those Creditors who hold security for their Claims
against the Company;
1.2.85. “South Africa” means the Republic of South Africa;
1.2.86. “Standard Bank” means The Standard Bank of South Africa Limited,
Registration No. 1962/000738/06, a company incorporated in accordance with
the laws of South Africa;
1.2.87. “Subsidiaries” means the wholly owned subsidiaries of the Company,
comprising:
1.2.87.1. SAA Technical;
1.2.87.2. Mango;
1.2.87.3. Air Chefs; and
1.2.87.4. SACC.
1.2.88. “Substantial Implementation Date” means the earlier of:
1.2.88.1. [], or such later date as may be notified by the BRPs to
Affected Persons,
upon which date the BRPs will file with CIPC a notice of substantial
implementation in terms of section 152(8) of the Companies Act whereupon
Business Rescue will end in terms of section 132(2)(c)(ii);
1.2.89. “Tax/Taxation” means:
1.2.89.1. levies payable to Government authorities;
1.2.89.2. normal taxation;
1.2.89.3. capital gains tax;
1.2.89.4. value-added tax;
1.2.89.5. donations tax;
1.2.89.6. customs duty;
1.2.89.7. securities transfer tax;
1.2.89.8. all Pay-As-You-Earn taxation (PAYE) not paid over;
1.2.89.9. all other forms of taxation, other than deferred tax; and
1.2.89.10. any penalties or interest on any of the aforegoing;
1.2.90. “Trade Unions” means the following registered trade unions representing
employees of the Company:
1.2.90.1. National Transport Movement;
1.2.90.2. National Union of Metalworkers of South Africa;
1.2.90.3. South African Airways Cabin Crew Association;
1.2.90.4. Aviation Union of South Africa;
1.2.90.5. South African Transport and Allied Workers Union;
1.2.90.6. Solidarity; and
1.2.90.7. South African Airways Pilots Association;
1.2.91. “Transfer Shares” means the shares to be transferred by the Company to
New HoldCo in terms of the Proposed Restructure;
1.2.92. “Value-Added Tax Act” means the Value Added Tax Act, No. 89 of 1991, as
amended;
1.2.93. “VAT” means the value-added tax levied in terms of the Value-Added Tax Act;
1.3. any reference to any statute, regulation or other legislation in this Business Rescue Plan shall
be a reference to that statute, regulation or other legislation as at the Publication Date, and as
amended or substituted from time to time;
1.4. any reference in this Business Rescue Plan to any other agreement or document shall be
construed as a reference to such other agreement or document as same may have been, or
may from time to time be, amended, varied, novated or supplemented;
1.5. if figures are referred to in numerals and in words and if there is any conflict between the two,
the words shall prevail;
1.6. if any provision in a definition in this Business Rescue Plan is a substantive provision
conferring a right or imposing an obligation on any person or entity then, notwithstanding that
it is only in a definition, effect shall be given to that provision as if it were a substantive provision
in the body of this Business Rescue Plan;
1.7. where any term is defined in this Business Rescue Plan within a particular paragraph other
than this paragraph 0, that term shall bear the meaning ascribed to it in that paragraph
wherever it is used in this Business Rescue Plan;
1.8. where any number of days is to be calculated from a particular day, such number shall be
calculated as excluding such particular day and commencing on the next day. If the last day
of such number so calculated falls on a day which is not a Business Day, the last day shall be
deemed to be the next succeeding day which is a Business Day;
1.9. any reference to days (other than a reference to Business Days), months or years shall be a
reference to calendar days, months or years, as the case may be; and
1.10. words or terms that are capitalised and not otherwise defined in the narrative of this Business
Rescue Plan (excluding capitalised words or terms used for the purpose of tables) shall bear
the meaning assigned to them in the Companies Act.
2. ACTION TO BE TAKEN BY AFFECTED PERSONS
2.1. If any Affected Person is in doubt as to what action should be taken arising from the contents
of this Business Rescue Plan, such Affected Person or Affected Persons are advised to
consult an independent attorney, accountant or other professional advisor in addition to any
consultation with or direction received from the BRPs.
2.2. Nothing contained in this Business Rescue Plan shall constitute legal or Tax advice to any
Affected Person, nor do the BRPs make any representations in respect thereof.
3. STRUCTURE OF THE PLAN
For the purposes of section 150(2) of the Companies Act, this Business Rescue Plan is divided into 3
(three) parts as follows –
3.1. PART A - BACKGROUND
This part sets out the background to the Company and the factors that resulted in the
Company being Financially Distressed and being placed under Business Rescue. The
Company’s financial distress is described more fully in paragraph [] below.
3.2. PART B - PROPOSALS
This part describes the terms of the proposals and includes, inter alia, the benefits and/or
effect of adopting the Business Rescue Plan as opposed to the Company being placed into
liquidation.
3.3. PART C – ASSUMPTIONS AND CONDITIONS
This part sets out, inter alia, what conditions need to be fulfilled in order for the Business
Rescue Plan to become effective, and to be implemented.
_____________________________________________________________________________________
PART A – BACKGROUND
______________________________________________________________________________________
4. COMPANY INFORMATION
4.1. Shareholding Structure
4.1.1. As at the Publication Date, the issued share capital of the Company comprises:
4.1.1.1. Class “A” ordinary shares: 7 237 691 465 (seven billion two hundred
and thirty seven million six hundred and ninety one thousand four
hundred and sixty five);
4.1.1.2. Class “B” ordinary shares: 2 412 563 822 (two billion four hundred
and twelve million five hundred and sixty three thousand eight
hundred and twenty two);
4.1.1.3. Class “C” ordinary shares: 2 412 563 822 (two billion four hundred
and twelve million five hundred and sixty three thousand eight
hundred and twenty two);
4.1.1.4. Class “D” ordinary shares: 603 140 956 (six hundred and three
million one hundred and forty thousand nine hundred and fifty six);
and
4.1.1.5. Class “E” ordinary shares: 117 578 806 (one hundred and seventeen
million five hundred and seventy eight thousand eight hundred and
six).
4.1.2. Government, represented by the DPE, is the sole shareholder of the Company.
4.2. Directors
4.2.1. As at the Commencement Date, the directors of the Company, according to
CIPC, were:
Name of Director Date of
Appointment
Deon Jeftha Fredericks 29/10/2018
Zukisa Millicent Ramasia 11/06/2019
Ahmed Ismail Bassa (non-executive) 03/11/2017
Martin Lawrence Kingston (non-executive) 03/11/2017
Holmes Peter Maluleka (non-executive) 01/09/2016
Thandeka Nozipho Mgoduso (non-executive) 01/09/2016
Akhter Hoosen Moosa (non-executive) 01/09/2016
Geoffrey Rothschild (non-executive) 03/11/2017
Matsidiso Peter Tshisevhe (non-executive) 01/09/2016
4.2.2. The records of the Company are in the process of being updated with CIPC,
however, according to the Company records, the following are the directors of the
Company as at the Publication Date:
Name of Director Date of
Appointment
Ahmed Ismail Bassa (non-executive) 03/11/2017
Holmes Peter Maluleka (non-executive) 01/09/2016
Thandeka Nozipho Mgoduso (non-executive) 01/09/2016
Akhter Hoosen Moosa (non-executive) 01/09/2016
Geoffrey Rothschild (non-executive) 03/11/2017
Matsidiso Peter Tshisevhe (non-executive) 01/09/2016
4.3. Company Information
Financial Year End: 31 March
Registered Address: Airways Park
1 Jones Road
OR Tambo International Airport
Kempton Park
Gauteng
1620
Postal Address: Private Bag X13
OR Tambo International Airport
Kempton Park
Gauteng
1627
Auditors / Accountants: Auditor General South Africa:
Polani Sokombela
5. COMPANY BACKGROUND
5.1. Background to the Company
5.1.1. The Company was established in February 1934, when Government took over
Union Airways of South Africa, being the first commercial airline of South Africa.
It has been state-owned since then, except from 1999 to 2002, when Swissair
held 20% of the equity in the Company.
5.1.2. The Company's Business involves operating as a national airline carrier,
providing passenger and cargo transport services over various domestic, regional
and international routes. The Company is a member of Star Alliance, the largest
international airline alliance.
5.1.3. As at the Commencement Date, the Company:
5.1.3.1. Provided aviation transport services to [21] routes, comprising:
5.1.3.1.1. 9 international routes;
5.1.3.1.2. 15 regional routes; and
5.1.3.1.3. 6 domestic routes.
5.1.3.2. Held a fleet of 49 aircraft, comprising:
5.1.3.2.1. Owned aircraft:
5.1.3.2.1.1. 5 x A340-300 aircraft; and
5.1.3.2.1.2. 4 x A340-600 aircraft.
5.1.3.2.2. Leased aircraft:
5.1.3.2.2.1. 7 x A319 aircraft;
5.1.3.2.2.2. 10 x A320 aircraft;
5.1.3.2.2.3. 3 x A340-300 aircraft;
5.1.3.2.2.4. 3 x A340-600 aircraft;
5.1.3.2.2.5. 6 x A330-200 aircraft;
5.1.3.2.2.6. 5 x A330-300 aircraft;
5.1.3.2.2.7. 4 x A350-900 aircraft; and
5.1.3.2.2.8. 2 x B737-300F aircraft (freighters).
5.1.4. The Company has the following three non-corporate businesses (i.e. the
Divisions):
5.1.4.1. SAA Cargo, an air cargo service provider with capacity primarily
sourced from the “belly space” of SAA’s passenger aircraft fleet.
5.1.4.2. SAA Lounges, which provides lounge services to premium
passengers in the major cities in South Africa (Johannesburg,
Cape Town, Durban, East London and Port Elizabeth) and Africa
(Harare and Lusaka).
5.1.4.3. SAA Voyager, an airline loyalty programme.
5.1.5. In addition, the Company wholly owns the Subsidiaries, namely:
5.1.5.1. Mango, a global best-practice low-cost carrier, primarily operating in
the South African domestic market, and a feeder airline to the
Company;
5.1.5.2. SAA Technical, Africa’s largest aircraft Maintenance, Repair and
Overhaul (“MRO”) business;
5.1.5.3. Air Chefs, a catering business primarily supplying catering services
to the Company’s fleet and SAA Lounges in Johannesburg,
Cape Town and Durban; and
5.1.5.4. SACC, which is currently dormant but operated as a retail travel
business with franchises in South Africa and some other African
states.
5.1.6. The Company licenses its airline code to two feeder airlines, namely, SA Express
and SA Airlink. During the Company’s Business Rescue, however, SA Airlink
terminated the license agreement concluded with the Company, which
termination will be effective from 6 June 2020 and SA Express was placed in
provisional liquidation on 28 April 2020.
5.1.7. As at the Commencement Date, the Company employed approximately 4 708
(four thousand seven hundred and eight) employees, comprising:
5.1.7.1. 617 pilots;
5.1.7.2. 1 516 cabin crew;
5.1.7.3. 209 managers;
5.1.7.4. 216 specialists; and
5.1.7.5. 2 150 non-managers.
5.1.8. As stated above, the Company is wholly owned by Government, with shareholder
oversight vested in the DPE.
5.2. Current Group Organogram
Air Chefs
SAA Technical
The Company
(South African Airways SOC Ltd)
Mango
Government
SACC
Divisions: SAA Voyager SAA Lounges SAA Cargo
5.3. Background to the Company's Financial Distress
5.3.1. The main reasons for the Company’s financial distress are the following:
5.3.1.1. The Company has suffered significant losses in each financial year
since the 2014 financial year.
5.3.1.2. There has been a lack of adequate recapitalisation which resulted in
the Company experiencing severe liquidity constraints, which was
exacerbated by:
5.3.1.2.1. The confirmation by Government that it would not
continue supporting the Company financially in the
manner that it had previously done, but would
provide financial support to facilitate a radical
restructuring of the Company.
5.3.1.2.2. The grounding of SAA aircraft by the Civil Aviation
Authorities, in October 2019, due to technical none
compliance which negatively affected the reputation
of the airline with travel agents and passengers
5.3.1.2.3. The industrial action that occurred over an eight day
period in November 2019 which had the effect of
severely hampering the cash flow of the Company.
5.3.1.2.4. The Company lost significant revenue during
November 2019 where the Company should have
been ramping up to its busiest period.
5.3.1.2.5. The issuing of an application to commence business
rescue proceedings by one of the Trade Unions.
The adverse publicity in the media shortly after the
commencement of business rescue proceedings
had the following consequences:
5.3.1.2.5.1. the withdrawal of travel insurance
by various insurers;
5.3.1.2.5.2. various travel agents halting the
sale of the Company’s tickets to
their customers and preferring to
use other carriers; and
5.3.1.2.5.3. customers that had already booked
flights started cancelling their flights
and requesting refunds.
5.3.1.2.6. The governance issues at the Company which
resulted in a high turnover of executive management
over the last ten years;
5.3.1.2.7. In adequate capitalisation of the subsidiaries with
increasing dependency on the Company to provide
them with working capital; and
5.3.1.2.8. Increased competition with a significant pressure on
the Company’s pricing for tickets.
5.3.2. The aforesaid adversely affected the Company’s cash flow and caused the
Company to become illiquid and therefore financially distressed in that is was
unable to pay its liabilities to lenders and creditors as they fell due.
6. SUMMARY OF THE BUSINESS RESCUE
6.1. Introduction
Business Rescue, as defined in section 128 (1) (b) of the Companies Act, refers to
proceedings to facilitate the rehabilitation of a company that is financially distressed by
providing for –
6.1.1. the temporary supervision of a company by one or more business rescue
practitioners, and of the management of its affairs, business and property;
6.1.2. a temporary moratorium on the rights of claimants against a company or in
respect of property in its possession; and
6.1.3. the development and implementation, if approved, of a plan to rescue the
company in question by restructuring its affairs, business, property, debt and
other liabilities, and equity in a manner that maximises the likelihood of the
company in question continuing in existence on a solvent basis or, if it is not
possible for the company to so continue in existence, results in a better return for
the company's creditors or shareholders than would result from the immediate
liquidation of the company.
6.2. The following summary sets out the salient dates on which certain events have taken and will
take place during Business Rescue –
EVENT DATE
Board Resolution to commence Business Rescue 5 December 2019
Commencement of Business Rescue
(date on which the above resolution was filed at the CIPC)
5 December 2019
Appointment of BRP – Matuson 5 December 2019
Appointment of BRP – Dongwana 18 December 2019
First Employees' Meeting 20 December 2019
First Creditors’ Meeting 20 December 2019
First Employees’ Committee Meeting 5 January 2020
Second Employees’ Committee Meeting 31 January 2020
Third Employees’ Committee Meeting 3 February 2020
Fourth Employees’ Committee Meeting 6 February 2020
First Creditors’ Committee Meeting 6 February 2020
Fifth Employees’ Committee Meeting 28 April 2020
Second Creditors’ Committee Meeting 28 April 2020
Consultation with Employees’ Committee on draft Business Rescue Plan
[] May 2020
Consultation with Creditors’ Committee on draft Business Rescue Plan
[] May 2020
Consultation with Government on draft Business Rescue Plan [] May 2020
Business Rescue Plan published [] May 2020
Meeting to consider the Business Rescue Plan in terms of section 151 of the Companies Act
[] June 2020
7. STEPS TAKEN SINCE THE APPOINTMENT OF THE BRPS
7.1. ADMINISTRATIVE MATTERS
7.1.1. Appointment of BRPs
Matuson was appointed on 5 December 2019 and Dongwana was appointed on
18 December 2018, both appointments have been confirmed by the CIPC.
7.1.2. Management Control
In terms of section 140 (1) (a) of the Companies Act, the BRPs took over full
management control of the Company, but as they were entitled to do, the BRPs
delegated certain functions and operations to certain Management.
7.1.3. Notices
The BRPs have been publishing notices to affected persons in terms of the
Companies Act.
7.1.4. Reporting to CIPC
The BRPs have complied with all statutory obligations under the Companies Act
and will render monthly reports to CIPC as contemplated in section 132 (3) of the
Companies Act.
7.1.5. Appointment of Alvarez & Marsal as Global Aviation Restructuring Experts
The BRPs appointed and mandated Alvarez & Marsal to provide:
7.1.5.1. Independent and objective advice, from an aviation operations
perspective, on opportunities to reduce cash burn, including cost
reduction and operations improvement opportunities;
7.1.5.2. to provide the restructuring plan options for the airline which would
then be developed into a BR plan once Government has chosen their
preferred plan and
7.1.5.3. based on their aviation industry contacts, to assist in sourcing a SEP
for the Company.
7.1.6. Appointment of PWC as Independent Experts
7.1.6.1. The BRPs appointed and mandated PWC:
7.1.6.1.1. to provide cash flow forecasts to show the liquidity
requirements for each of the restructuring scenarios
for SAA;
7.1.6.1.2. to develop an integrated financial forecasting and
business model [based on the Proposed
Restructuring Plan] (“Financial Model”); and
7.1.6.1.3. as independent experts for purposes of calculating
the estimated liquidation dividend that would be
received by Creditors, in their specific classes, if the
Company were to be immediately placed in
liquidation.
7.1.6.2. The Financial Model was used, inter alia, to prepare the projected
balance sheet and statement of income and expenses for the
Company for the ensuing three years, dealt with in paragraph []
below.
7.1.6.3. The liquidation dividend is dealt with in paragraph [] below.
7.1.7. Extension for Publication of Business Rescue Plan
In terms of section 150 (5) of the Companies Act, the Business Rescue Plan was
required to be published within 25 (twenty five) Business Days from the
appointment of the BRPs. The BRPs ultimately obtained an extension from the
Creditors as contemplated in section 150 (5) (b) of the Companies Act for the
publication of the Business Rescue Plan to [29 May 2020].
7.1.8. Publication of Business Rescue Plan and Notice of Meeting
7.1.8.1. The Business Rescue Plan will be published to all Affected Persons
on the Publication Date.
7.1.8.2. The Notice of Meeting will be delivered to all Affected Persons
simultaneously with the publication of the Business Rescue Plan.
7.1.8.3. The publication of the Business Rescue Plan and delivery of the
Notice of Meeting will take place in accordance with the provisions of
the Companies Act and the Regulations thereto.
7.1.9. Cash Resources
7.1.9.1. In order to preserve the cash resources of the Company, the BRPs
implemented immediate cash relief initiatives and explored broader
cost optimisation initiatives, which are dealt with further in
paragraph [].
7.1.9.2. The BRPs also obtained PCF from the PCF Lenders, which is dealt
with further in paragraph [].
7.2. LABOUR
7.2.1. Employees’ Meetings
7.2.1.1. A first meeting of Employees, as contemplated in section 148 (1) of
the Companies Act, was convened on 20 December 2019.
7.2.1.2. At this meeting, inter alia:
7.2.1.2.1. the business rescue process was explained;
7.2.1.2.2. Employees were informed of the BRPs’ opinion
regarding the reasonable prospect of rescuing the
Company;
7.2.1.2.3. Employees were informed of the BRPs’ actions since
the Commencement Date;
7.2.1.2.4. assistance was also given to the Employees by
providing answers to their various queries; and
7.2.1.2.5. nominations were requested for the establishment of
the Employees’ Committee.
7.2.2. Employees’ Committee
7.2.2.1. Pursuant to the first meeting of Employees, the Employees’
Committee was duly established.
7.2.2.2. The Employees’ Committee comprises the following:
7.2.2.2.1. representatives from the Trade Unions; and
7.2.2.2.2. representatives for the independent employees
(being those employees unrepresented by trade
unions).
7.2.2.3. The members of the Employees’ Committee appointed Cloete Murray
as the independent chairperson of the Employees’ Committee.
7.2.2.4. The Employees' Committee met with the BRPs on 5 January 2020,
31 January 2020, 4 February 2020,6 February 2020, 12 March 2020
and 28 April 2020.
7.2.3. Consultation on the Draft Business Rescue Plan
7.2.3.1. On 31 May 2020, the BRPs provided the draft Business Rescue Plan
to, inter alia, representatives on the employees’ committee to:
7.2.3.1.1. enable them to make representations to the BRPs
for consideration, subject to the BRPs’ overall
responsibility to publish a Business Rescue Plan
which they regard as representing the best
prospects of rescuing the Company as contemplated
in the Companies Act; and
7.2.3.1.2. afford them sufficient opportunity to review the draft
Business Rescue Plan and prepare a submission as
contemplated in section 152 (1) (c) of the Companies
Act.
7.2.3.2. On [], the BRPs consulted with the employees’ committee and [].
[D/N: Insert outcome of consultation].
7.2.4. Section 189 of the LRA Process
7.2.4.1. It became apparent that for the Business Rescue efforts to be
successful, and for liquidation to be avoided, it was necessary for the
Company to restructure its operations and also reduce its costs
significantly.
7.2.4.2. The Company has formed the view that, alongside other cost savings
measures to be implemented, the best way for the Company to
reduce its costs significantly in order for the Business Rescue efforts
to be successful, and for liquidation to be avoided, is by the Company:
7.2.4.2.1. reducing the number of its employees in line with the
optimal operations; and
7.2.4.2.2. revising the terms and conditions of employment of
the remaining employees to align them with the
market related conditions, preferably through
collective agreements concluded with those Trade
Unions representing the majority of the Company’s
remaining employees.
7.2.4.3. As a result, on 9 March 2020, the Company, having contemplated the
possibility of such dismissals and a possible new structure, issued
notices in terms of section 189 (3) read together with section 189A of
the LRA (“section 189 (3) notices”) to all Employees and their trade
unions.
7.2.4.4. In terms of those section 189 (3) notices, all of the positions with the
Company would be potentially affected. All employees would be
displaced, and the selection criteria would be applied to offer
employees new jobs in the new proposed structure, at revised terms
and conditions of employment. In the event that an employee does
not accept a job offered to them, then it is proposed that they would
be selected for retrenchment, and another displaced employee will
be offered that position. 2 440 positions were made available in terms
of the proposed new structure on significantly revised terms and
conditions of employment. Representative Trade Unions will be
required to conclude new collective agreements giving effect to the
proposed changes and cancelling existing collective agreements
insofar as same are at variance with the proposed changes.
7.2.4.5. It must be mentioned that both NUMSA and SACCA withdrew from
the section 189 process initially citing health concerns in the context
of the COVID-19 pandemic and later in protest for inadequacy of
information provided by the Company.
7.2.4.6. The issuance of the section 189 (3) notices was the first step in a
statutory facilitated consultation process which commenced on 20
March 2020 under the auspices of facilitation at the CCMA. The
Company and the consulting parties held consultation meetings
and/or bilateral meetings on the following dates 20 March 2020,
23/03/2020, 24/03/2020, 26/03/2020, 01/04/2020, 02/04/2020,
03/04/2020, 13/04/2020, 14/04/2020, 15/04/2020, 16/04/2020,
17/04/2020, 18/04/2020, 20/04/2020, 23/04/2020, 28/04/2020 and
29/04/2020..
7.2.4.7. Following the declaration by the President of the Republic of South
on 15 March 2020 of a National State of Disaster, a s189
Supplementary Notice was issued to all employees on 19 March
2020. The restrictions of movement imposed as a result of the
declaration was expected to have a severe impact on the revenue
and cash generating ability of the Company which, in the opinion of
the Company and BRPs, necessitated an expedited s189
consultation process. Furthermore, the Company requested that the
parties consult and reach agreement on measures to mitigate the
adverse effects of the Covid-19 pandemic, such as the
implementation of short time and a rotational lay off
7.2.4.8. The section 189 (3) notices were issued after consultation with the
DPE, and notification to National Treasury.
7.2.4.9. The Company, for a minimum period of 60 (sixty) days as prescribed
in terms of the LRA, consulted with the consulting parties, on all the
issues set out in the section 189 (3) notices. This consultation
process was facilitated by two commissioners from the CCMA and
ended on 8 May 2020.
7.2.4.10. Mutual separation agreements were offered to the employees on the
terms set out below. The period for acceptance of the agreements
will be set out in more detail in paragraph [] .
7.2.5. On or about 22 November 2019, the Company had concluded a salary agreement
with a coalition of two of the recognised unions (NUMSA and SACCA) within its
workplace to regulate salaries and other conditions until 31 March 2020. In terms
of these salary agreements, the Company agreed to pay salary increases and
back pay to employees in separate tranches subject to the Company securing
funding for such purposes and such funding being available in February, March
and April 2020. The trade unions have enquired on and demanded the payment
of such salary increases and back-pay. To date, the funding required for such
salary increases has not been provided and accordingly the BRPs have not
authorised such payment of these salary increases and back-pay.
7.3. CREDITORS
7.3.1. Creditors’ Meeting:
7.3.1.1. A first meeting of Creditors, as contemplated in section 147 (1) of the
Companies Act, was convened on 20 December 2019
(“the First Meeting”).
7.3.1.2. At the First Meeting, inter alia:
7.3.1.2.1. the business rescue process was explained;
7.3.1.2.2. Creditors were informed of the BRPs’ opinion
regarding the reasonable prospect of rescuing the
Company;
7.3.1.2.3. Creditors were informed of the BRPs’ actions since
the Commencement Date;
7.3.1.2.4. assistance was given to the Creditors by providing
answers to their various queries;
7.3.1.2.5. the BRPs received proof of Pre-commencement
Claims by Pre-commencement Creditors; and
7.3.1.2.6. nominations were requested for the establishment of
the Creditors’ Committee.
7.3.2. Creditors' Committee
7.3.2.1. Pursuant to the First Meeting, a Creditors Committee was duly
established.
7.3.2.2. The members of the Creditors’ Committee appointed
Juliette de Hutton as the independent chairperson of the
Creditors’ Committee.
7.3.2.3. The Creditors' Committee met with the BRPs on 6 February 2020 and
28 April 2020.
7.3.3. Consultation on the draft Business Rescue Plan
7.3.3.1. On 28 May 2020, the BRPs provided the draft Business Rescue Plan
to, inter alia, representatives on the creditors’ committee to:
7.3.3.1.1. enable them to make representations to the BRPs
for consideration, subject to the BRPs’ overall
responsibility to publish a Business Rescue Plan
which the BRPs regarded as representing the best
prospects of rescuing the Company as contemplated
in the Companies Act; and
7.3.3.1.2. afford them sufficient opportunity to review the draft
Business Rescue Plan.
7.3.3.2. On [], the BRPs consulted with the creditors’ committee.
[D/N: Insert outcome of consultation].
7.4. LEGAL
7.4.1. Court Applications:
7.4.1.1. SA Airlink:
7.4.1.1.1. On 17 January 2020, SA Airlink issued an urgent
application seeking, inter alia:
7.4.1.1.1.1. a declarator that the flown and
unflown revenue in respect of flights
which occurred prior to the
Company’s Business Rescue did
not amount to a “debt owed” as
contemplated in terms of section
154 (2) of the Companies Act, or are
not debts owed by the Company
immediately before the beginning of
Business Rescue; and
7.4.1.1.1.2. an order that the Company makes
payment of the aforesaid flown
revenue within five days of the order
sought.
7.4.1.1.2. The Company and BRPs opposed the urgent
application.
7.4.1.1.3. The urgent application was heard on
11 February 2020.
7.4.1.1.4. On 2 March 2020, the urgent application was
dismissed with costs, including the costs of two
counsel.
7.4.1.1.5. On 5 March 2020, SA Airlink applied for leave to
appeal.
7.4.1.1.6. On 13 March 2020, SA Airlink were granted leave to
appeal to the Supreme Court of Appeal.
7.4.1.1.7. SA Airlink and the Company have filed heads of
argument and are awaiting confirmation of the
hearing date.
7.4.1.2. Black Management Forum (“BMF”) Application:
7.4.1.2.1. On or about 13 January 2020, the BMF launched an
application challenging the appointment of Mr Nico
Bezuidenhout as the Chief Executive Officer of
Mango Airlines (SOC) Limited (“Mango”). The
Company is cited as the Second Respondent in its
capacity as Mango’s holding company.
7.4.1.2.2. On 5 February 2020, the Company filed its notice of
opposition.
7.4.1.2.3. On 2 March 2020 the Company filed its record of
proceedings.
7.4.1.2.4. The other respondents in the matter have also filed
their records of proceedings.
7.4.1.2.5. The BMF is now required to either supplement its
founding papers or to notify the respondents that it
will not supplement its founding papers.
7.4.1.2.6. Upon the BMF supplementing its papers or notifying
the respondents that it will not supplement its
papers, the respondents, including the Company will
be required to file their answering papers.
7.4.1.3. NUMSA and SACCA application 1
7.4.1.3.1. On 10 February 2020 NUMSA and SACCA filed an
urgent application in the Labour Court for an order in
the order following terms:
7.4.1.3.1.1. That the Company’s and the
Business Rescue Practitioners’
announcement on 6 February 2020
in respect of the purported
dismissals of NUMSA and SACCA’s
members due to changes in the
flight network of the Company be
declared null and avoid for non-
compliance with the LRA and be set
aside;
7.4.1.3.1.2. That the Company’s and the
Business Rescue Practitioners’
failure to engage in meaningful joint-
consensus seeking consultations as
envisaged in section 189 and 189A
of the LRA be declared as unlawful
and/or unfair;
7.4.1.3.1.3. That the Company be interdicted
and restrained from taking any
steps towards terminating the
employment of NUMSA and
SACCA members in terms of the
restructuring process until it has
complied with the procedural
requirements in the LRA; and
7.4.1.3.1.4. That the Company be directed to
place NUMSA and SACCA
members on a trainee lay-off
scheme in terms of a collective
agreement between the parties.
7.4.1.3.1.5. The matter was heard on 13
February 2020 and judgment was
handed down on 14 February 2020.
The application was dismissed and
no order as to costs was made.
7.4.1.3.1.6. On the same day (14 February
2020), NUMSA and SACCA
launched an application for leave to
appeal on an urgent basis. The
matter was heard on the same day
and judgement was reserved.
7.4.1.3.1.7. On 20 February 2020, the
application for leave to appeal was
dismissed.
7.4.1.3.1.8. On 21 February NUMSA and
SACCA petitioned the Labour
Appeal Court on an urgent basis for
leave to appeal.
7.4.1.3.1.9. On 26 February 2020, SAA filed a
notice of intention to oppose and
answering affidavit.
7.4.1.3.1.10. On 27 February 2020, NUMSA and
SACCA filed their replying affidavit.
7.4.1.3.1.11. The matter currently awaits a
decision from the Labour Appeal
Court. However, in circumstances
where the section 189 (3) notice has
already been issued by the BRPs on
9 March 2020, this petition is moot
and is unlikely to be pursued further.
7.4.1.4. NUMSA and SACCA application 2
7.4.1.4.1. On 30 April 2020 NUMSA and SACCA delivered
another urgent application in the Labour Court for an
order in the order following terms:
7.4.1.4.1.1. declaring that the Company’s and
the BRPs’ issuing of the section
189(3) notices was unlawful,
alternatively, that the issuing of the
section 189(3) notices and/or
continuation with the consultative
process is unfair;
7.4.1.4.1.2. directing the Company and the
BRPs to withdraw the section
189(3) notices, alternatively, to
suspend the consultative process
until a business rescue plan has
been presented;
7.4.1.4.1.3. directing the Company and the
BRPs not to terminate the services
of any employee pursuant to the
notices and not to process any
applications for voluntary severance
packages, alternatively, not to
terminate services of any employee
pursuant to the section 189(3)
notices until the prayer sought in
the aforesaid paragraph has been
complied with;
7.4.1.4.1.4. declaring that the Company’s and
BRPs’ suspension of the
contractual right of the members of
NUMSA and SACCA to be
considered for placement in the
Training Lay-Off Scheme as an
alternative to retrenchment is
unlawful; and
7.4.1.4.1.5. directing the Company and the
BRPs to uplift such suspension and
to take all necessary steps towards
giving effect to their reciprocal
obligations in respect of the
aforesaid contractual rights.
7.4.1.4.2. The application was set down for hearing on
7 May 2020. The Court found in favour of the
applicants on 8 May 2020.
7.4.1.4.3. On 25 May 2020, the Company applied for leave to
appeal.
7.4.1.4.4. On May 2020, the Company was granted leave to
appeal to the Labour Appeal Court.
7.4.2. Suspension and Cancellation of Contracts:
7.4.2.1. Section 136 (2) (2) of the Companies Act authorises the BRPs during
Business Rescue to entirely, partially or conditionally suspend, for the
duration of the business rescue proceedings, any obligation of the
Company that arises under an agreement to which that the Company
was a party at the Commencement Date and would otherwise
become due during the Business Rescue.
7.4.2.2. The BRPs suspended the Company’s obligations in terms of some of
the aircraft lease agreements concluded with Lessors, as detailed in
paragraph [], whereafter the Lessors exercised their contractual
rights to begin termination proceedings on the applicable lease
agreements.
7.4.2.3. The BRPs also suspended certain of the Company’s obligations and
cancelled certain contracts concluded by the Company prior to the
Commencement Date in terms of section 136 (2) of the
Companies Act or in accordance with the terms of the respective
contracts.
7.4.3. Investigation into the affairs of the Company
In terms of section 141 (1) (c) of the Companies Act, the BRPs must investigate
the Company’s affairs, business, property and financial situation. This is dealt
with further under the review of procurement contracts in paragraph36.
7.4.4. General:
The BRPs were required to engage attorneys to advise on, inter alia, issues
relating to employment, Tax, regulatory issues, contractual disputes, PCF, post-
commencement agreements, the Proposed Restructure, Claims against the
Company and various issues arising out of the Business Rescue.
7.5. BUSINESS RESCUE INITIATIVES
7.5.1. The Proposed Restructure
7.5.1.1. The BRPs, together with the Advisors and Management, conducted
an objective assessment of the Company and evaluated various
business rescue scenarios to optimise the Company’s business
model, flight network and cost base.
7.5.1.2. Pursuant to conducting the aforesaid assessment and evaluation,
and after consultation with the Government, the BRPs developed a
proposal to restructure the Company’s affairs, business, property,
debt and other liabilities, and equity in a manner that would maximise
the likelihood of the Company continuing in existence on a solvent
basis.
7.5.1.3. The details of the Proposed Restructure are set out in paragraph57.
7.5.2. Post-Commencement Finance
7.5.2.1. On 7 December 2019, the PCF Bank Lenders granted a PCF
revolving credit facility to the Company in the amount of
R2 000 000 000.00 (two billion Rand) (which debt is secured by
Government Guarantees in favour of the PCF Bank Lenders).
7.5.2.2. On 27 January 2020, DBSA granted a PCF term loan facility to the
Company in the amount of R3 500 000 000.00 (three billion five
hundred million Rand) (which debt is secured by a Government
Guarantee in favour of DBSA).
7.5.3. Government Funding and Guarantees
7.5.3.1. In terms of the 2020 Budget Speech, Government has allocated an
amount of R16.4 billion to the Company in order to repay Lenders
who are secured by way of the Guarantees for legacy debt, PCF and
the applicable interest, as detailed in paragraph60.
7.5.3.2. Additional funding will be required for the Proposed Restructure in
order to address the working capital requirements and the
retrenchment costs.
7.5.4. Lessors and Fleet Optimisation
7.5.4.1. In order to address liquidity constraints, the BRPs negotiated
deferred payments with the Lessors in terms of which:
7.5.4.1.1. Lessors were paid 50% of the amounts due to them
since the Commencement Date on
31 December 2019 and the remaining 50% was paid
on 15 January 2020;
7.5.4.1.2. Lessors were, and continued to be, paid on a weekly
basis from 1 February 2020 until end of March 2020.
7.5.4.2. The BRPs then proceeded to identify which aircraft are necessary for
the Business and issued suspension notices to the Lessors of those
aircraft which are not necessary for the Business going forward.
7.5.4.3. Pursuant to the aforesaid suspension notices, certain lessors opted
to terminate their agreements as detailed in annexure [].
7.5.4.4. The negotiated lease agreements will take effect after the Adoption
Date.
7.5.4.5. The aforesaid actions will result in substantial savings of aircraft lease
charges to the Company.
7.5.5. Cash Conservation and Management Office
7.5.5.1. The BRPs established a Cash Conservation and Management Office
(“CCMO”).
7.5.5.2. The role of the CCMO is to:
7.5.5.2.1. enforcement of discipline to optimise cash resources
through review and authorisation of all
expenses/costs excluding costs related to fuel and
leasing of aircrafts;
7.5.5.2.2. holistic monitoring of the cash resources to ensure
that there is sufficient liquidity for the execution of
critical operations;
7.5.5.2.3. ;
7.5.5.2.4. ensure that the allocation of cash flow within the
Company yields the most optimal results for the
Company;
7.5.5.2.5. identify and implement real time cost reduction
opportunities;
7.5.5.2.6. identify and eliminate costs not necessary for the
safe and efficient day-to-day operations of the
Company; and
7.5.5.2.7. review and approve the Company’s daily cash run
prior to payment execution.
7.5.5.3. All expenditure, whether previously provided for or not, needs to be
approved by the CCMO, after compliance with the cost authorisation
procedures set out by the CCMO.
7.5.5.4. The CCMO is comprised of 10 members, mainly from the BRPs’
teams and Management, who meet every weekday.
7.5.6. Review of Procurement Contracts
7.5.6.1. The BRPs established a fleet management work stream, which
performed the following:
7.5.6.1.1. Review of all contracts for leasing of aircrafts.
7.5.6.1.2. Review of contracts for the supply of fuel.
7.5.6.2. Contracts which were deemed as not commercially viable were
cancelled and the affected Lessors were advised to take back the
aircrafts. This resulted in the return of 3 passenger aircrafts and
2 cargo aircrafts.
7.5.6.3. For the remaining aircraft, terms of the various contracts were
renegotiated with a particular focus on the lease charges which
resulted in reductions. This is dealt with in paragraph35.
7.5.6.4. The BRPs also developed a work stream to review contracts and
assess the value for money for each contract, which work stream
was responsible for the following activities:
7.5.6.4.1. Obtaining the Company’s payment records for the
period 1 March 2018 to 30 April 2019, and
performing an analysis of same.
7.5.6.4.2. Obtaining a list of suppliers from the group
procurement department.
7.5.6.4.3. Reviewing supplier contracts other than those
relating to aircraft and fuel.
7.5.6.5. The approach adopted by the team was to start by reviewing the top
twenty contracts by spend, based on the payment records for the
period 1 March 2018 to 30 April 2019. A significant number of the
contracts related to the procurement of ITS services. These
contracts were then reviewed systematically.
7.5.6.6. The team also reviewed the nature and frequency of the costs and/or
expenditure submitted for approval at CCMO and verified same
against the contract list.
7.5.6.7. In the instances where the contracts were deemed to be priced above
the market rates, they were renegotiated with the suppliers to reduce
the costs to market rates.
7.5.6.8. In the instances where the contracts were deemed to be priced above
the market rates, and the suppliers were not amenable to a
negotiated reduction of rates to market rates, those contracts we
cancelled.
7.5.6.9. In all instances where the contracts were deemed to be prices
significantly higher than the market, those contracts were submitted
to the Special Investigating Unit for investigation for any potential
fraud and/or corruption.
7.5.6.10. During this process, it was identified that there are numerous services
that are outsourced by the Company, which, in the BRPs’ view, do
not need to be outsourced, because there is either capability to
perform those services within the Company, or, with a small capital
investment, it would be more beneficial for the Company to insource
those services. The process of insourcing these services would have
commenced at the end of March 2020.
7.5.7.
7.5.8. Stakeholder Engagement and Management
7.5.8.1. In order for the Business Rescue to succeed, it was, and remains,
imperative that the BRPs constantly engage with and manage the
various stakeholders involved in the Company’s Business Rescue.
7.5.8.2. To this extent, and in addition to what has been set out in paragraph
[] above, the BRPs have had various engagements with, inter alia:
7.5.8.2.1. DPE and National Treasury;
7.5.8.2.2. Trade Unions;
7.5.8.2.3. Regulatory authorities including the Civil Aviation
Authority, Air Services Licensing Council, IATA; and
7.5.8.2.4. Association of South African Travel Agents, other
trade partners and insurers to the travel industry.
7.5.8.3. The BRPs continue to engage with all stakeholders throughout the
Business Rescue.
7.5.9. Operational Review
7.5.9.1. The BRPs conducted an operational review of the Business and
mandated Alvarez & Marsal to provide an objective and impartial
insight into the operations of the Company. The approach that was
adopted is as follows;
7.5.9.1.1. Assuming the severe cash constraints and survival
as the key objective so as to identify a portfolio of
profitable routes to maintain SAA branded flights and
retain as may jobs as possible;
7.5.9.1.2. Applying a fact based, objective assessment of the
impacts on fleet, people and facilities;
7.5.9.1.3. Withdrawing from unprofitable routes and increase
overall SAA Group profitability;
7.5.9.1.4. Identified aircraft and routes that could be better
utilised or reassigned to increase yield and capacity.
Identify regional routes that would help increase
aircraft utilisation so as to improve overall
profitability;
7.5.9.1.5. Assess the ancillary businesses to achieve a more
viable business model with potential to attract SEPs.
7.5.9.2. The outcomes of its review as set out in paragraph [] below.
7.5.10. PFMA Application
7.5.10.1. In an attempt to expedite and facilitate critical decision making
required to effect cost-savings during the Company’s Business
Rescue, the BRPs applied to the DPE on 18 December 2019 for:
7.5.10.1.1. a partial exemption from the requirements of section
54 (2) of PFMA, and
7.5.10.1.2. an exemption from the requirements of various
clauses of the Company’s Memorandum of
Incorporation (“MoI”).
7.5.10.2. On 19 December 2019, the DPE granted the Company:
7.5.10.2.1. an exemption from the requirements of section 54 (2)
of the PFMA insofar as the following transactions are
concerned:
7.5.10.2.1.1. acquisition or disposal of a
significant shareholding in a
company;
7.5.10.2.1.2. acquisition or disposal of a
significant asset, unless the value of
the transaction exceeds R1 billion
(in the case of disposals);
7.5.10.2.1.3. commencement or cessation of a
significant business activity; and
7.5.10.2.1.4. significant change in the nature or
extent of its interest in a significant
partnership, trust, unincorporated
joint venture or similar arrangement,
7.5.10.2.2. approval to:
7.5.10.2.2.1. commence proceedings in terms of
section 189 of the LRA, to
implement any retrenchment of the
Company’s employees;
7.5.10.2.2.2. conclude voluntary severance
agreements with the Company’s
employees; and
7.5.10.2.2.3. conclude transactions covered by
clauses 3.4 and 3.5 of the
Company’s MoI.
7.5.10.3. On 26 December 2019, the Minister of Finance granted a similar
exemption due to certain conditions to Government guarantees
issued by the Minister of Public Enterprises and concurred to by the
Minister of Finance to secure debts of the Company.
7.5.10.4. This exemption was subsequently withdrawn by the Department of
Public Enterprise on xxx
7.5.11. Financial Stability of Subsidiaries
[D/N: To be updated closer to publication]
7.5.11.1. The Company’s Business Rescue had various consequences on the
Subsidiaries and various intra-group transactions were required, both
for the successful Business Rescue of the Company and in order to
sustain the financial viability of the Subsidiaries.
7.5.11.2. Pursuant to the grant of the supplementary exemption referred to in
[], [the BRPs proceeded with / intend to proceed with the
following intra-group transactions]:
7.5.11.2.1. the capitalisation of SAA Technical, Air Chefs and
Mango through subscription by the Company of
ordinary shares in these entities to ensure financial
stability during [the Proposed Restructure]; and
7.5.11.2.2. [the transfer of rights, duties, assets and/or liabilities
between the Company and the Subsidiaries as part
of the Proposed Restructure].
7.5.11.3. [The grant of the supplementary exemption will also allow the
Subsidiaries to conclude transactions and will further ensure their
financial stability and will limit the Company from having to continue
funding them post-Business Rescue. These transactions included
proceedings in terms of section 189 of the LRA and the sale / disposal
of assets to generate liquidity to fund operational costs.]
7.5.12. Route Retention and Closures
7.5.12.1. During the 2019 calendar year, only eight routes were profitable at
the C5 level (one International & seven Regional).
7.5.12.1.1. The International market (57% revenue) route losses
for FY19 were (R3,040m).
7.5.12.1.2. The Regional market (29% revenue) route losses for
FY19 were (R315m).
7.5.12.1.3. The Domestic market (14% revenue) route losses for
FY19 were (R868m).
7.5.12.2. In order to have a sustainable and profitable SAA, significant cost
reductions are required across labour, aircraft costs, maintenance,
property and supplier contracts.
7.5.12.3. Analysis showed that even by cutting costs by 25% and reducing
revenue by 10%, there were routes that still remained significantly
loss making with no option to optimise further at the C5 level and
these routes were:
7.5.12.3.1. Three of the international destinations (Hong Kong,
Munich, Sao Paulo).
7.5.12.3.2. Four of the regional destinations (Luanda, Entebbe,
Dakar and Abidjan)
7.5.12.3.3. All four of the domestic destinations (Cape Town,
Durban, Port Elizabeth and East London)
7.5.12.4. Taking account of the above and the objective of the having a
sustainable National Carrier that is independent and not reliant on
fiscal support, in the long term, the following is the proposed route
network for SAA:
7.5.12.5. [D/N: insert slide with route selection, please ensure that the
domestic routes CPT and DBN are included in the current route
network]
7.5.12.6. [D/N: we should also include the following routes that can be
brought back online post the implementation of the plan and on
a strategic basis and to be operated differently so as to minimise
the losses and eventually strive for profitability:
7.5.12.6.1. Domestic (More frequencies in Cape Town-
Durban and Port Elizabeth)
7.5.12.6.2. Regional (Blantyre, Entebbe, Gaborone,
Libreville, Luanda, Ndola)
7.5.12.6.3. International (Munich)].
7.5.13. Temporary Suspension of Flights
7.5.13.1. On 06 February 2020 the BRPs announced the suspension of all
loss-making routes with a clear objective of saving cash in the short
run in order to ensure the survival of SAA in the immediate term and
extend its cash runway until it receives the funds it requires to
restructure.
7.5.13.2. It was announced that SAA would be flying the following routes in
light of its current cash position:
7.5.13.2.1. International Routes:
7.5.13.2.1.1. New York;
7.5.13.2.1.2. Washington via Accra;
7.5.13.2.1.3. Perth;
7.5.13.2.1.4. Frankfurt; and
7.5.13.2.1.5. London.
7.5.13.2.2. Regional Routes:
7.5.13.2.2.1. Mauritius;
7.5.13.2.2.2. Dar es Salaam;
7.5.13.2.2.3. Victoria Falls;
7.5.13.2.2.4. Lagos;
7.5.13.2.2.5. Maputo;
7.5.13.2.2.6. Harare;
7.5.13.2.2.7. Lusaka;
7.5.13.2.2.8. Lilongwe;
7.5.13.2.2.9. Windhoek;
7.5.13.2.2.10. Kinshasa; and
7.5.13.2.2.11. Nairobi.
7.5.13.2.3. Domestic Route:
7.5.13.2.3.1. Cape Town
7.5.13.3. Re-assessment of routes
7.5.13.3.1. Subsequent to the announcement and with the
progress of the business rescue process, new
information came to light which allowed BRPs to re-
evaluate their decision on the routes going forward.
Some of the new information included:
7.5.13.3.1.1. A number of the lessors having
since committed to the reduction of
their aircraft lease costs subject to
the approval of the Business
Rescue Plan by the creditors and
lenders;
7.5.13.3.1.2. The cost reduction initiatives started
under the business rescue process
started bearing fruit;
7.5.13.3.1.3. The initiation of the section 189
process was intended to reduce
headcount and revise terms and
conditions of employment, which
would go a long way in the reduction
of both route and overhead costs.
7.5.13.3.2. The Company is also working on a structured plan
for the re-instatement of any one of routes which
become profitable after taking into account the
effects of a broader revenue enhancement strategy
and implementation of the BR Plan.
7.5.13.4.
7.5.14. Ad hoc arrangements
7.5.14.1. As mentioned above, the Company licenses its airline code on two
feeder airlines, namely, SA Express and SA Airlink.
7.5.14.2. The BRPs negotiated ad hoc arrangements with SA Express and
SA Airlink in respect of those tickets which were purchased through
the Company’s airline code and flown after the Commencement
Date.
7.5.14.3. As set out above, the license agreement concluded between the
Company and SA Airlink has been terminated, which termination will
take effect on 6 June 2020 and SA Express was placed under
provisional liquidation on 28 April 2020.
7.5.15. Other Cash Preservation Initiatives
7.5.15.1. In addition to the aforesaid, and as part of the various cash
preservation initiatives, the BRPs:
7.5.15.1.1. repatriated excess funds from various international
outstations;
7.5.15.1.2. engaged with IATA, Worldpay and Amex to recover
earned revenues withheld by these providers the
engagements were successful; and
7.5.15.1.3. deferred non-critical expenses to assist with liquidity.
7.5.16. Strategic Equity Partner:
7.5.16.1.1. the BRPs with the assistance of their Advisors have
been actively pursuing strategic equity partners for
the Company and/or Divisions;
7.5.16.1.2. To this end, three parties have been engaged who
are considering various arrangements that they
might be interested in;
7.5.16.1.3. One of the parties is not interested in being a SEP, it
is however interested in forming an alliance
agreement which would provide SAA with increased
passenger volumes by being included in the
network;
7.5.16.1.4. All these engagements took place pre-COVID-19,
and would be revived once the aviation industry is
back on its feet
7.5.16.1.5. ];
8. MARKET CONDITIONS AND TRADING FOLLOWING THE COMMENCEMENT DATE
8.1. Market Conditions
8.1.1. The Solidarity Application and the industrial action that occurred over an eight
day period in November 2019 had a detrimental effect on the cash flow of the
Company by virtue of, inter alia, the following:
8.1.1.1. various travel insurance companies which insure the ticket
reservations withdrew their cover; and
8.1.1.2. major travel agencies publicly announced their decision to refrain
from booking any of their customers on the Company’s flights.
8.1.2. This, together with certain other factors, caused a complete dissipation of public
trust in the Company’s ability to continue as a going concern (inter alia, honour
flights booked by customers). In turn, these circumstances, coupled together with
the fact that the Company was placed under Business Rescue supervision,
resulted in significantly reduced ticket sales.
8.1.3. The uncertainty about the future of the Company continued until it was publicly
announced that Government had decided not to liquidate the Company, but
preferred a radical restructure of the Company which would result in the Company
becoming a self-sustaining airline with the ability to possibly attract a strategic
equity partner in the future.
8.1.4. Despite the negative sentiments around the Company, during the holiday peak
season of 15 December 2019 to 15 January 2020, the Company was able to
attract a significant portion of the market with better than anticipated results. This
was due to the fact that all airline carriers are fully booked during the holiday peak
season. Thus, all of the passengers who could not be accommodated on other
carriers ended up booking with the Company.
8.1.5. However, the forward booking after 15 January 2020 declined significantly.
8.1.6. On 13 January 2020 the Government elected its preferred restructuring option for
the Company.
8.1.7. After 15 January 2020, the Company undertook to perform a significant number
of tactical cancellations in order to avoid flying empty aircraft. This caused a
concern in the market as regards to the going concern of the Company.
8.1.8. After the BRPs obtained PCF from the DBSA, there was an increase in market
confidence that the Company would continue as a going concern in the short
term.
8.1.9. On 6 February 2020, the BRPs announced the suspension of various
international, regional and domestic routes, as a cost cutting initiative. The
market immediately reacted by not making reservations on the Company’s flights
in the fear that there would be further route cancellations at a later stage.
8.1.10. During the month of February 2020, the BRPs managed, subject to providing
security, to reinstate the ticket reservations insurance and this restored some of
the important relationships with the travel agencies. This increased market
confidence.
8.1.11. Prior to the national-wide lockdown, the BRPs were in advanced stages of
finalising the Initial Proposed Restructure, which sought the highest retention of
jobs possible and the restructuring of the Company so that it was sustainable,
non-reliant on Government funding in the future and a platform for growth. The
Proposed Restructure required a minimum restructuring cost of approximately
R7.7 billion (seven billion and seven hundred million Rand) and would have been
proposed in terms of this Business Rescue Plan.
8.1.12. In fact it had been intended to publish such plan to employees and other Affected
Persons during the week commencing 16 March 2020. However, the effect of
COVID-19 then began to become clear and has had a fundamental impact upon
the Business Rescue, resulting in the BRPs having to reconsider the Company’s
position and to ascertain whether further funds could be obtained.
8.2. COVID -19
8.2.1. COVID -19 far beyond the negative impact on the global economy, resulted in an
unprecedented global aviation crisis, which has detrimentally impacted the
Company and other airlines across the world.
8.2.2. Globally, the effects of the COVID-19 virus started magnifying in late February
2020, with a significant and un-anticipated impact on the global airline industry,
which led to, inter alia:
8.2.2.1. The widespread immediate cessation of flying operations following
the travel bans and lockdowns in various countries.
8.2.2.2. The reduction of revenue from ticket sales and an increase in the
demand for refunds.
8.2.2.3. An increased level of uncertainty regarding the length of social
distancing and lockdown periods.
8.2.2.4. An increased level of uncertainty of the costs of care and
maintenance of the airline infrastructure during the lockdown periods
and the cost to restart operations after the lockdowns.
8.2.3. As the global airline industry was the first to experience the negative effects of
COVID-19, many governments indicated their support for their domestic airlines.
8.2.4. In regard to South Africa, on 15 March 2020, President Cyril Ramaphosa
declared a national state of disaster in terms of the Disaster Management Act,
57 of 2002. The President further advised that Cabinet had decided on various
urgent and drastic measures (“measures”) to, inter alia, manage Covid-19 and
to reduce the impact of same, including:
8.2.4.1. A travel ban imposed on foreign nationals from high-risk countries
such as Italy, Iran, South Korea, Spain, Germany, United States of
America, United Kingdom and China as from 18 March 2020.
8.2.4.2. Visas to visitors from high-risk countries had been cancelled from
15 March 2020 and previously granted visas were revoked.
8.2.4.3. South African citizens had been advised to refrain from all forms of
travel to or through the European Union, United States of America,
United Kingdom and other identified high-risk countries, such as
China, Iran and South Korea, with immediate effect.
8.2.4.4. Government would regularly issue travel alerts referring to specific
cities, countries or regions as the situation evolves based on the risk
level. Any foreign national who had visited high-risk countries in the
prior 20 days would be denied a visa.
8.2.4.5. South Africa has 72 ports of entry in the country which are land, sea
and air ports. Of the 53 land ports, 35 were shut down from Monday
16 March 2020.
8.2.4.6. All non-essential travel for all spheres of government outside of
South Africa had been prohibited with immediate effect.
8.2.4.7. All non-essential domestic travel, particularly by air, rail, taxis and
bus, had been discouraged.
8.2.5. As noted by the President:
8.2.5.1. There had been a dramatic decline in economic activity in the major
trading partners, a sudden drop in international tourism and severe
instability across all global markets.
8.2.5.2. The anticipated effects of the decline in exports and tourist arrivals
would be exacerbated by both an increase in infections and the
measures required to contain the spread of the disease.
8.2.5.3. This would have a potentially severe impact on production, the
viability of businesses, job retention and job creation.
8.2.6. On 23 March 2020, the President announced an unprecedented nation-wide
lockdown to contain the spread of COVID -19 for a period of 21 days with effect
from midnight on 26 March 2020. The lockdown resulted in, inter alia, the close
of South Africa’s borders and a ban on air travel (other than limited repatriation
chartered flights and cargo support for essential services).
8.2.7. On 9 April 2020, the President announced that the lockdown would be extended
to the end of April 2020.
8.2.8. On 23 April 2020, the President announced that Government developed five
Covid-19 levels to determine the measures to have in place based on the
country’s COVID -19 situation. Moreover, the President announced that the then
current level 5 would be lifted to level 4 from 1 May 2020. This resulted in some
activity being allowed to resume, subject to extreme precautions required to limit
community transmission and outbreaks. However, the President confirmed that
South Africa’s borders will remain closed to international travel, except for the
repatriation of South African nationals and foreign citizens, and no travel will be
allowed between provinces, except for the transportation of goods and
exceptional circumstances.
8.2.9. Consequently, COVID -19 has had a detrimental effect on the airline industry
globally, resulting in flight cancellations, grounding of aircraft, closure of airports
as well as retrenchments of employees. This detrimental effect impacted the
Company’s business, with forward bookings on international routes and regional
routes collapsing substantially from the week ending 13 March 2020 compared
to the same week in the previous year. The implications of the collapse in
customer demand, and the President’s necessary response to COVID -19,
resulted in a bleak revenue outlook.
8.2.10. The Company accordingly ceased operating, other than operating certain
chartered flights and its cargo division for essential services purposes.
8.2.11. The measures, although necessary and fully supported by the Company and the
BRPs, detrimentally impacted air travel, being the Company’s primary business,
and exacerbated the Company’s precarious position.
8.2.12. Following the nation-wide lockdown and the Company having ceased operating,
the BRPs addressed correspondence to Government, through the DPE, on
2 April 2020. In terms of this correspondence, the BRPs, inter alia:
8.2.12.1. provided an update on how COVID -19 was impacting the Business;
8.2.12.2. presented a care and maintenance plan and various scenarios for the
restart of the Company’s operations in the event of a prolonged
lockdown, as well as the costing for this plan;
8.2.12.3. requested an extension of the foreign borrowing limits of the
Company, as required by the potential funders for the overall
restructuring and care and maintenance period, and as an alternative
to sourcing local funds; and
8.2.12.4. requested an urgent response from Government on their support for
the care and maintenance plan and commitment on funding for the
Company.
8.2.13. On 14 April 2020, Government, through the DPE, advised the BRPs, inter alia,
that:
8.2.13.1. Government will not support the extension of the foreign currency
borrowing limit to permit foreign financing of the Business Rescue
Plan;
8.2.13.2. Government will not support a care and maintenance budget as
proposed by the BRPs;
8.2.13.3. Government will not provide further lending guarantees in respect of
the Business Rescue; and
8.2.13.4. The BRPs must consider their options within their available
resources.
8.2.14. On 23 April 2020, the BRPs addressed a notice to affected persons advising,
inter alia, as follows:
8.2.14.1. In light of the notification from Government that no further funding
would be provided or available to the BRPs to develop and implement
a business rescue plan which would have contemplated a restructure
of the Company to maximise the likelihood of the Company
continuing on a solvent basis (i.e. the Initial Proposed Restructure)
or, at a minimum, a care and maintenance plan of the Company until
the travel bans are lifted, the BRPs only had two options available to
them, being:
8.2.14.1.1. The development of a business rescue plan which
secures a better return the Company’s creditors than
would result from its immediate liquidation. This
would entail the Wind-Down Process, which would
envisage the termination of the employment of
employees (with severance packages being agreed)
and a sales process being undertaken, which will
ultimately result in a distribution of such proceeds to
affected persons who are entitled thereto in terms of
the payment waterfall.
8.2.14.1.2. If the BRPs cannot reach an agreement with
employees, then the BRPs will be unable to continue
with the Business Rescue and will have to urgently
apply for an order discontinuing the Business
Rescue and placing the Company into liquidation.
8.2.14.2. The BRPs did not have sufficient funds available to continue
honouring the Company’s obligations beyond 30 April 2020 and to
bear the costs of the Wind-Down Process. Accordingly the Wind-
Down Process was dependent on the employees accepting the
termination of their employment timeously by mutual consent.
8.2.15. The deadline for an agreement to be reached with the Trade Union
representatives and representatives of non-unionised employees on the terms of
the collective agreement was first extended from 24 April 2020 to 1 May 2020.
Upon a request from the DPE, a further and final extension was granted from
1 May 2020 to 8 May 2020. The BRPs, however, reserved their rights to offer
individual agreements directly to employees for acceptance from 8 May 2020 to
11 May 2020. The extensions were only made possible by virtue of unpaid
absence from 1 May 2020. The extension has been extended indefinitely
8.2.16. In respect of those employees who do not conclude the individual agreement or
are not bound by the concluded collective agreement, the Company will continue
with the consultation process in terms of section 189 read with 189A of the LRA,.
8.3. Trading
8.3.1. Prior to 18 March 2020, the Company generated cash through:
8.3.1.1. normal trading with ticket sales, albeit on a reduced scale due to the
aforesaid market conditions;
8.3.1.2. commissions in terms of alliance and license agreements; and
8.3.1.3. accessing PCF.
8.3.2. Since 18 March 2020, and following the President’s address on 15 March 2020
pursuant to the outbreak of Covid-19:
8.3.2.1. South Africa commenced with a nation-wide lockdown and a travel
ban was implemented which resulted in all air travel ceasing.
8.3.2.2. In early April 2020, the Company assisted with the repatriation of
South African nationals and was requested by foreign governments,
through their embassies, to assist in the repatriation of their citizens,
which charters were provided by the Company after an ease in
regulations. In light of the Company’s financial position, these
charters ceased in the first week of May 2020.
8.3.2.3. Despite the lockdown being lifted to level four from 1 May 2020,
South Africa’s borders will remain closed to international travel,
except for the repatriation of South African nationals and foreign
citizens.
8.3.2.4. The Company has been unable to generate sufficient income, which
will persist for the foreseeable future.
9. MATERIAL ASSETS AND SECURITY OF THE COMPANY AS AT THE COMMENCEMENT DATE
As required in terms of section 150 (2) (a) (i) of the Companies Act, a complete list of all the material
assets of the Company at book value, as well as an indication as to which assets were held as security
by Creditors as at the Commencement Date, is attached hereto as Annexure A.
10. CREDITORS OF THE COMPANY AS AT THE COMMENCEMENT DATE
10.1. As required in terms of section 150 (2) (a) (ii) of the Companies Act, a complete list of the Pre-
commencement Creditors of the Company, as reflected in the Company’s records, as at the
Commencement Date, is attached hereto as Annexure B.
10.2. Annexure B indicates which of the aforesaid Pre-commencement Creditors:
10.2.1. would qualify as secured, statutorily preferent or concurrent in terms of the laws
of insolvency; and
10.2.2. have proved their Pre-commencement Claims.
11. CREDITORS VOTING INTEREST AND VOTING BY PROXY
11.1. In terms of section 145 of the Companies Act, for the purpose of any vote by Creditors:
11.1.1. a Creditor has a voting interest equal to the value of the amount owed to that
Creditor by the Company on the date of the vote on the Business Rescue Plan;
and
11.1.2. a Creditor who would have a subordinated claim in liquidation has a voting
interest, as independently appraised and valued at the request of the BRPs, equal
to the amount, if any, that the Creditor could reasonably expect to receive in a
liquidation of the Company.
11.2. PCF Creditors, including Employees with Post-commencement Claims in terms of section 135
(1) of the Companies Act, will have a voting interest equal to the value of the amount owed to
that PCF Creditor.
11.3. A Creditor who has a Disputed Claim, contingent Claim, prospective Claim, damages or
unliquidated Claim will only be allowed to vote in the sole discretion of the BRPs.
11.4. A Creditor whose Claim amount does not reconcile with the Company’s records will only be
allowed to vote on the amount determined in the sole discretion of the BRPs.
11.5. Voting by proxy will be allowed as long as the form of proxy attached to the Notice of the
Meeting is lodged with the BRPs. Creditors and Affected Persons are required to lodge their
forms of proxy by way of email to [] by no later than 17h00 on [].
11.6. All forms of proxy given on behalf of a company, a legal entity or a trust must be accompanied
by a valid and authorised resolution supporting the appointment of the proxy.
11.7. Notwithstanding what has been stated in this paragraph, the BRPs have a discretion to accept
any proxy submitted.
12. PROBABLE DIVIDEND ON LIQUIDATION
12.1. As required in terms of section 150 (2) (a) (iii) of the Companies Act, the probable dividend
which Concurrent Creditors would receive if the Company were to be placed into liquidation
is 0 (zero) cents in the Rand.
12.2. In order to establish the aforesaid probable dividend, the BRPs engaged PWC as an
independent expert to calculate the potential dividend in a liquidation scenario as at the
Commencement Date.
12.3. PWC prepared their liquidation calculation on the following basis:
12.3.1. That the Company would have been liquidated as at 31 October 2019, adjusted
for additional liabilities to the extent known and quantifiable.
12.3.2. Asset realisations are predicated on the basis of a “fire sale” or break up basis in
the main.
12.3.3. In addition to this, they have assumed that a liquidator of SAA would seek full
powers from the Court –and accordingly be in a position to, inter alia, dispose of
all Subsidiaries shares. In this context, all subsidiary investments are assumed
to be concurrently and immediately disposed of/closed down.
12.3.4. Unless specifically stated, balance sheet recorded creditors are assumed to
reflect valid liquid claims for the purposes of the illustrative liquidation analysis. ]
12.4. The calculation in support of a liquidation dividend as at the Commencement Date is based
on an independent exercise undertaken by PWC and Affected Persons are encouraged to
properly consider the calculation presented by PWC and satisfy themselves as to the accuracy
thereof. If any Affected Person requires a full copy of the liquidation and distribution account,
please contact Lance Schapiro of Matuson & Associates at [].
12.5. PWC relied on [] for the purpose of calculating the liquidation dividend as at the
Commencement Date, [and the approximate realisation value is set out in the full liquidation
calculation document prepared by PWC].
12.6. The methodology used by PWC in calculating the liquidation dividend is the methodology
chosen by PWC in their sole discretion and the BRPs are not in a position to comment on the
methodology. The BRPs have considered the calculation presented by PWC and are satisfied
that it is a fair and reasonable calculation of the liquidation dividend.
12.7. The probable dividend which Concurrent Creditors would have received if the Company was
liquidated on the Commencement Date is 0 (zero) cents in the Rand.
12.8. Based on the dividend calculation of PWC as at the Commencement Date, the BRPs therefore
estimate that the probable dividend which Concurrent Creditors would receive if the Company
was to be liquidated as at the Publication Date would be [zero] cents in the Rand.
12.9. The figures in paragraphs 12.5 and 12.6 take into account all the costs associated with a
liquidation, including all the costs associated with Section 89 of the Insolvency Act.
13. HOLDERS OF THE COMPANY’S ISSUED SECURITIES
As required in terms of section 150 (2) (a) (iv) of the Companies Act, Government is the sole holder of
the Company’s issued securities. Please refer to paragraph [].
14. THE PRACTITIONERS’ REMUNERATION
14.1. If the BRPs propose charging further remuneration, section 150 (2) (a) (v) of the Companies
Act requires a copy of the written agreement concerning the BRPs’ remuneration, as
contemplated in terms of section 143 of the Companies Act, to be included in the Business
Rescue Plan.
14.2. The BRPs, however, will not be proposing an agreement providing for further remuneration,
additional to the prescribed tariff, in terms of section 143 of the Companies Act.
14.3. The Company's public interest score, calculated in terms of Regulation 26 (2) of the
Companies Act, as at the Commencement Date was 25 826. A company is regarded as a
large sized company if its public interest score is over 500.
14.4. The BRPs' remuneration will accordingly be charged at the prescribed tariff rates, set out in
Regulation 128 to the Companies Act, for a large sized company.
15. STATEMENT ABOUT WHETHER THE BUSINESS RESCUE PLAN INCLUDES A PROPOSAL
MADE INFORMALLY BY A CREDITOR
As required in terms of section 150 (2) (a) (vi) of the Companies Act, this Business Rescue Plan does
not include any informal proposals made by a Creditor or Creditors of the Company.
_____________________________________________________________________________________
PART B – PROPOSALS
______________________________________________________________________________________
16. PURPOSE AND OBJECTIVE OF BUSINESS RESCUE
16.1. The purpose of the Business Rescue provisions contained in the Companies Act, as set out
in section 7 (k) of the Companies Act, is to provide for the efficient rescue and recovery of
financially distressed companies, in a manner that balances the rights and interests of all
relevant stakeholders.
16.2. The objective of Business Rescue, as set out in section 128 (1) (b) (iii) of the Companies Act,
is to develop and implement a plan that rescues the Company:
16.2.1. by restructuring its affairs, business, property, debt and other liabilities, and equity
in a manner that maximises the likelihood of the Company continuing in existence
on a solvent basis (“Objective A”); or
16.2.2. if the aforementioned is not possible, results in a better return for the Company’s
creditors or shareholders than would result from the immediate liquidation of the
Company (“Objective B”).
16.3. The objective of this Business Rescue Plan is to provide Affected Persons with information
reasonably required to facilitate them in deciding upon this Business Rescue Plan, including
information upon which Affected Persons may:
16.3.1. assess the likely outcome of the dividend yield calculation under Business
Rescue, as set out in []; and
16.3.2. be reasonably assured of the likelihood of obtaining a better outcome under
Business Rescue, when compared to a liquidation.
17. MORATORIUM
17.1. In terms of section 133 of the Companies Act, the commencement of Business Rescue places
a moratorium on legal proceedings and enforcement action against the Company. This means
that, subject to the exceptions provided for in section 133 of the Companies Act, Creditors will
not be able to proceed in any forum against the Company for non-payment of debts during
Business Rescue.
17.2. The intention of a moratorium is to give the Company the best possible chance to implement
the Business Rescue Plan.
17.3. As required in terms of section 150 (2) (b) (i) of the Companies Act, the moratorium in relation
to the Company commenced on the Commencement Date and is expected to remain in place
until the Substantial Implementation Date or until the business rescue proceedings are
terminated. After the Substantial Implementation Date, Creditors will only be entitled to claim
payment in accordance with the provisions of this Business Rescue Plan.
18. SUMMARY OF THE PROPOSAL IN TERMS OF THIS BUSINESS RESCUE PLAN
18.1. The BRPs, together with the Advisors and Management, conducted an objective assessment
of the Company and evaluated various restructuring scenarios to optimise the Company’s
business model, route network and cost base.
18.2. Pursuant to conducting the aforesaid assessment and evaluation, and in consultation with the
relevant Affected Persons, the BRPs have developed a proposal in accordance with
Objective A, referred to in paragraph [], being a restructuring of the Company’s affairs,
business, property, debt and other liabilities, and equity in a manner that maximises the
likelihood of the Company continuing in existence on a solvent basis.
18.3. The proposal to rescue the Company is the implementation of the Proposed Restructure, more
fully dealt with in paragraph [].
18.4. The Proposed Restructure entails the restructuring of the Company’s Business to achieve an
optimised flight operation (“SAA Restructured”);
18.5. The appropriations to be made by Government, through the National Treasury, will be
allocated to, inter alia, the following:
18.5.1. the funding required to implement the Proposed Restructure; and
18.5.2. payment of the amounts owed to the Lenders, which are secured by way of the
Guarantees.
18.6. To ensure that the General Concurrent Creditors receive a better dividend in the Business
Rescue, and subject to this Business Rescue Plan being adopted and the
Proposed Restructure being successfully implemented:
18.6.1. An amount of [] will be allocated to payment of the General Concurrent
Creditors, being the Concurrent Allocation, which payment will be made by the
Receivers in the Receivership, as more fully dealt with in paragraph65; and
18.6.2. the Lenders will not participate in Distributions made out of the
Concurrent Allocation, as more fully dealt with in paragraph [].
18.7. The Concurrent Allocation will result in the General Concurrent Creditors receiving a dividend
of [] ([]) cents in the Rand, being the General Concurrent Dividend, compared to a probable
dividend of zero cents in the Rand upon liquidation, subject to the risks and assumptions set
out in this Business Rescue Plan.
18.8. To ensure a successful Business Rescue in terms of Objective A, payment of the General
Concurrent Dividend to the General Concurrent Creditors will be in full and final settlement of
the Pre-commencement Claims of the General Concurrent Creditors. The General
Concurrent Creditors will, accordingly, not retain the balance of their Claims against the
Company after payment of the General Concurrent Dividend, same being discharged as
contemplated in section 154 of the Companies Act [upon Substantial Implementation]. The
General Concurrent Creditors will only have claims against the Receivers in terms of the
General Concurrent Dividend.
18.9. In order to terminate the Company’s Business Rescue as soon as possible, this Business
Recue Plan provides for a Receivership to deal with the Claims and Distributions detailed in
this Business Rescue Plan, which Receivership will arise after the Substantial Implementation
Date. The Receivership is dealt with in paragraph 69below.
18.10. The advantages of proceeding with this Business Rescue Plan are, inter alia, as follows:
18.10.1. the Company’s Business will be restructured in a manner that will result in the
Company continuing in existence in a solvent manner, as opposed to being
placed in liquidation;
18.10.2. not all of the Employees will be retrenched and many jobs will be preserved;
18.10.3. those Employees who are retrenched will be in a better position than in a
liquidation;
18.10.4. General Concurrent Creditors will receive a concurrent dividend, i.e. the General
Concurrent Dividend, as opposed to zero cents in the Rand in a liquidation; and
18.10.5. the costs of Business Rescue will be less than the costs of liquidation.
18.11. Affected Persons are referred to paragraph [] below for more information relating to the
advantages of proceeding in terms of this Business Rescue Plan as opposed to a liquidation.
18.12. In the circumstances, a Business Rescue in accordance with the Proposed Restructure will
not only achieve Objective A, but will also result in a better return than upon a liquidation and
will balance the interests of all stakeholders.
19. THE PROPOSED RESTRUCTURE
19.1. Having regard to the Company’s financial position and current organisational structure, it is
necessary to simultaneously implement both the SAA Restructure in order to achieve a
successful Business Rescue in accordance with Objective A.
19.2. The Proposed Restructure is depicted in the organogram below:
19.3. The numbers reflected in the above organogram are the steps required to implement the
Proposed Restructure and are summarised in the table below:
No. Step Required
1. Incorporation of New HoldCo by Government /DPE
1a. Capacitate New HoldCo (governance and operational structures for the whole group)
2.
Sale by Government of 100% of the shareholding in the Company and individual
subsidiaries to New HoldCo. Taxation and legal implications to be considered during the
sale and purchase of SAA to the HoldCo.
3. Eliminate individual governance and operational structures of all the companies in the
group
19.4. For the purposes of this Business Rescue Plan, the BRPs and their Advisors have prepared
a high level steps plan setting out the fundamental details, requirements and conditions
New HoldCo
Air Chefs SAA Technical SAA Restructured Mango
Government
1
SACC
3
2
relating to the aforesaid steps involved in implementing the Proposed Restructure
(“Steps Plan”). The Steps Plan is annexed to this Business Rescue Plan as Annexure []
(capitalised terms used in the Steps Plan shall have the same meaning assigned to them in
paragraph 1).
19.5. The Proposed Restructure, which is detailed in the Steps Plan (Annexures []) is subject to
the fulfilment of the conditions set out in the Steps Plan, which, for the sake of convenience,
are summarised in the table below:
[D/N: Update once Steps Plan finalised]
Group Restructure SAA Restructure
Government Consents and Exemptions Government Consents and Exemptions
Government Funding Government Funding
Restructure of Subsidiaries Management process and procedures must be implemented to effectively and efficiently manage SAA Restructured.
Employees reduced and terms and conditions of employment changed and consented to by Trade Unions by way of collective agreements concluded with all of the Trade Unions, or those Trade Unions representing the majority of the Company’s employees.
Flying Operations optimised – Route Closures and Fleet Optimisation
Contracts concluded by the Company must be assessed to ascertain whether such contracts are material to the conduct of the Restructured Business. The material contracts must be on terms which are viable for SAA Restructured; and in compliance with the statutorily prescribed procurement processes. The remaining contracts will be cancelled, either by way of agreement or by way of application in terms of section 136 of the Companies Act.
Investment in an Optimised IT infrastructure
Approvals for change of control from regulatory authorities: Licenses, Bilateral / Frequency Rights, IATA.
19.6. The Lenders will be paid out of the Government appropriation detailed in paragraph60.
19.7. The General Concurrent Creditors will be paid out of the Concurrent Allocation detailed in
paragraph65.
19.8. The Restructure Proceeds will vest in and be dealt with by the Receivers in accordance with
paragraph69.
20. ONGOING ROLE OF THE COMPANY
As required in terms of section 150 (2) (b) (iii) of the Companies Act, if the Proposed Restructure is
implemented, the restructured Company will continue operating as SAA.
21. GOVERNMENT APPROPRIATION AND FUNDING
21.1. Government, as the sole shareholder of the Company and acting through DPE, supports a
Business Rescue which results in a viable and sustainable national flag carrier that provides
international, regional and domestic services.
21.2. The Proposed Restructure seeks to achieve, inter alia, the aforesaid result.
21.3. Consequently, and subject to the adoption of this Business Rescue Plan, Government has
agreed to:
21.3.1. fund the Proposed Restructure starting with a working capital injection that is
needed to restart the airline post the COVID-19 related travel bans and the ramp
up of operations as the activity increases due to further relaxation of all the other
travel bans including opening the borders. We estimate that the initial working
capital injection needed would not be less than R2 billion (two billion Rand). The
working capital requirements would be constantly monitored based on the
operational requirements. Details about the phased restart are contained in
paragraph [.];
21.3.2. fund the retrenchment of Employees pursuant to the process commenced in
terms of the Leadership Compact Forum or the section 189 process. Based on
the anticipated number of employees to be retrenched this amount is estimated
to be up to R2 billion (two billion Rand). This amount does not have to be paid
immediately, an arrangement with the employees can be reached where this
amount is deferred to a period where an appropriation for same is obtained or a
cash injection from a SEP is received, whichever comes first; and
21.3.3. allocate the following amounts:
21.3.3.1. R16.4 billion towards payment of the Lenders, more fully dealt with in
paragraph64; and
21.3.3.2. a minimum of R600 million (six hundred million Rand), being the
Concurrent Allocation, towards payment of the General Concurrent
Creditors, more fully dealt with in paragraph65.
22. LENDERS
The Lenders comprise the Pre-commencement Lenders and the PCF Lenders, dealt with separately
below.
22.1. Pre-commencement Lenders
22.1.1. As at the Commencement Date, the Company’s exposure to the
Pre-commencement Lenders was as follows:
Pre-commencement Lenders
Facility Type
Limits & Exposures R’000
Nedbank
Subordinated Long Term Loan 784,665
Term Loan 1,800,000
General Banking Facility2 200,000
2,784,665
Investec Term Loan 1,265,757
1,265,757
FirstRand Term Loan 585,399
General Banking Facility2 250,000
835,399
ABSA
Term Loan 1,700,000
Bridge 558,538
Call Loan2 130,000
2,388,538
Standard Bank Structured Loans 1,057,949
General Banking Facilit2/3 250,000
1,307,949
IAM Term Loan 253,151
253,151
Ashburton Term Loan 113,918
113,918
Momentum Term Loan 105,480
105,480
Sanlam Term Loan 168,768
168,768
Total Pre-commencement Lenders 9,223,625
Notes:
1. Amounts do not include capitalised interest since the Commencement Date.
2. Utilisation under the general banking facility and/or call loan facilities at
Nedbank, FirstRand, ABSA and Standard Bank may fluctuate.
3. Portion of Standard Bank’s general banking facility has become a PCF facility.
22.1.2. The Company’s aforesaid exposure to the Pre-commencement Lenders is
secured by guarantees issued by Government in favour of the Pre-
commencement Lenders.
22.2. PCF Lenders
The PCF Lenders comprise the PCF Bank Lenders and DBSA. Which are dealt with
separately below.
22.2.1. PCF Bank Lenders
22.2.1.1. On 7 December 2019, the PCF Bank Lenders granted a PCF
revolving credit facility to the Company in the amount of
R2 000 000 000.00 (two billion Rand) (“Bank PCF”).
22.2.1.2. The following amounts were made available by the respective
PCF Bank Lenders to the Company under the Bank PCF:
PCF Bank Lenders
Facility Type
Limits & Exposures R’000
Nedbank PCF 648,932
Investec PCF 294,969
FirstRand PCF 194,679
ABSA PCF 556,619
Standard Bank PCF 304,801
Total PCF Bank Lenders 2,000,000
22.2.1.3. The repayment date for the Bank PCF is the earlier of:
22.2.1.3.1. 31 July 2020;
22.2.1.3.2. the date of completion of the business rescue of the
Company in accordance with this Business Rescue
Plan; or
22.2.1.3.3. the date of commencement of liquidation of the
Company.
22.2.1.4. As security for the Bank PCF, Government issued unconditional and
irrevocable first demand payment guarantees in favour of each PCF
Bank Lender guaranteeing the performance of the obligations of the
Company to each PCF Bank Lender under the Bank PCF.
22.2.2. DBSA
22.2.2.1. On 27 January 2020, DBSA granted a PCF term loan facility to the
Company in the amount of R3 500 000.00 (three billion five hundred
million Rand) (“DBSA PCF”).
22.2.2.2. The DBSA PCF was required as a bridge to the appropriation to be
made by Government to the Company, which is dealt with further in
paragraph [].
22.2.2.3. The repayment date for the DBSA PCF is the earlier of:
22.2.2.3.1. 31 July 2020;
22.2.2.3.2. the date of completion of the business rescue of the
Company in accordance with this Business Rescue
Plan; or
22.2.2.3.3. the date of commencement of liquidation of the
Company.
22.2.2.4. As security for the DBSA PCF:
22.2.2.4.1. Government issued an unconditional and
irrevocable first demand payment guarantee in
favour of DBSA guaranteeing the performance of the
obligations of the Company to DBSA under the
DBSA PCF; and
22.2.2.4.2. a cession agreement was concluded in terms of
which the Company’s rights in and to a ring-fenced
bank account opened by the Company for the
purpose of receiving the amounts to be paid or
payable to the Company by or on behalf of
Government (“DBSA Account”), were ceded to
DBSA.
22.3. Repayment of Lenders
As set out above, Government has issued guarantees in favour of the Lenders in respect of
the obligations of the Company to the Lenders. Government has accordingly allocated
R16.4 billion to repay the Lenders as set out below.
22.3.1. DBSA
22.3.1.1. The amount owed to the DBSA under the DBSA PCF, being:
22.3.1.1.1. R3.5 billion in capital; and
22.3.1.1.2. R168 million in estimated interest,
will be paid into the DBSA Account during the 2020/2021 fiscal year.
22.3.2. Pre-commencement Lenders and PCF Bank Lenders
22.3.2.1. The Pre-commencement Lenders and the PCF Bank Lenders will be
paid over three years in accordance with the below table:
[D/N: Table to be updated once confirmed interest with DPE and
Lenders – will include an interest column]
Fiscal Year
Amount to Pre-Commencement
Lenders R’000
Amount to PCF Bank Lenders
2020/2021 3,800,000 2,000,000
2021/2022 3,800,000
2022/2023 1,623,916
Total (excluding interest) R10,923,916 Total (including estimated interest) R12,719,903
22.3.2.2. The aforesaid amounts will be paid to the Receivers, subject to the
following:
22.3.2.2.1. the adoption of this Business Rescue Plan;
22.3.2.2.2. the amounts being paid into a ring-fenced bank
account opened by the Receivers for this purpose on
a quasi-ownership basis in terms of which ownership
in and to the funds will vest in the Pre-
commencement Lenders and PCF Bank Lenders
(“Appropriation Accounts”); and
22.3.2.2.3. the rights in and to the proceeds in the
Appropriation Accounts being ceded to the Pre-
commencement Lenders and PCF Bank Lenders.
22.3.2.3. The Receivers will be obliged to pay the Pre-commencement
Lenders and PCF Bank Lenders within 7 days of receipt of amounts
paid by Government into the Appropriation Accounts.
22.4. In consideration for the above payments, and subject to the adoption of this Business Rescue
Plan, the Lenders will not participate in Distributions of the Restructure Proceeds and/or the
Concurrent Allocation in settlement of their Claims.
22.5. The Lenders’ Claims will vest in the Receivership and they will no longer have a claim against
the Company, subject to retaining their full Claims against Government under the Guarantees.
22.6. The Pre-commencement Lenders have agreed to consolidate their Pre-Commencement
Claims on the following terms and conditions:
[D/N: To be inserted by A&O].
23. GENERAL CONCURRENT CREDITORS
The General Concurrent Creditors comprise the Pre-commencement Creditors, excluding the
Lenders. This paragraph deals with the effect of this Business Rescue Plan and the
Proposed Restructure on the General Concurrent Creditors.
23.1. Payment of the General Concurrent Creditors
23.1.1. As set out above, the Concurrent Allocation, being an amount R600 million (six
hundred million Rand), will be allocated to payment of the Pre-commencement
Claims of the General Concurrent Creditors, should the General Concurrent
Creditors’ claim increase post the Adoption Date there will be no increase in the
amount available for distribution to General Concurrent Creditors and Concurrent
Allocation will be paid to the General Concurrent Creditors pro rata.
23.1.2. The payment of the allocated amount of R600 million (six hundred million) will be
repaid over a three year period commencing from the resumption of domestic,
regional and international flights, other than repatriation and COVID-19 related
charters.
23.1.3. Pre-commencement Creditors will also be issued with a promissory note or
similar instrument that would accrue interest over the three year period and would
be convertible into a form of equity in SAA upon the lapse of the three period set
out in 65, should there be any portion of the allocated amount outstanding at that
point.
23.1.4. This will result in a General Concurrent Dividend of R600 million (six hundred
million Rand) being paid by the Receivers in the Receivership to the General
Concurrent Creditors over the three year period or a conversion of that debt to
equity at the lapse of the three year period.
23.3. Claims and release of the Company from the payment of debts
23.3.1. In return for the right to participate in the Concurrent Allocation and with effect
from the Substantial Implementation Date:
23.3.1.1. each General Concurrent Creditor will be deemed to have acceded
to the discharge of the remainder of such General Concurrent
Creditor’s Pre-commencement Claim after payment of the General
Concurrent Dividend, and will lose its rights to enforce the relevant
balance of such debt against the Company (the provisions of section
154 (1) of the Companies Act will accordingly apply); and
23.3.1.2. aside from their rights to claim payment of the General Concurrent
Dividend from the Receivers, no General Concurrent Creditor shall
have any Pre-commencement Claim against the Company from the
Substantial Implementation Date.
23.3.2. Consequently, and as required in terms of section 150 (2) (b) (ii) of the
Companies Act, upon the Substantial Implementation Date, the General
Concurrent Creditors will have Pre-commencement Claims against the
Receivers, as provided for in paragraph69, and the Company will be released
from the payment of debts to the Pre-commencement Creditors.
23.4. Contracts
As required in terms of section 150 (2) (b) (iii) of the Companies Act, one of the conditions
required for the Proposed Restructure is the cancellation, modification or restructuring of
certain Contracts. To the extent that Contracts are cancelled, Creditors’ Claims for damages
will be limited as contemplated in paragraph36;
23.5. Damages
23.5.1. In the event that Creditors claim damages, whether contractual, delictual or
statutory, against the Company, which damages Claim is accepted by the BRPs
or proved by way of the Dispute Mechanism or by Court or similar proceedings,
such damages Claims:
23.5.1.1. shall be a concurrent Claim, unless the Creditor holds security for
such claim;
23.5.1.2. will be deemed to be limited to general damages suffered over the
lesser of 2 (two) months from the date on which the alleged damages
Claim arose or the balance of the Contract duration. For purposes
hereof, general damages are those which, on an objective basis,
would be reasonably foreseeable at the time of entering into the
relevant Contract as a probable consequence of, and with a
sufficiently close connection to, any breach by the Company of such
Contract so as to be said to flow naturally and generally and not to
be too remote;
23.5.1.3. will be deemed to exclude all consequential (including loss of profit)
and indirect damages; and
23.5.1.4. if disputed, will be resolved in terms of the Dispute Mechanism,
detailed in paragraph 78.
23.6. Section 22 of Value-Added Tax Act
[D/N: Need to discuss this and if we include same]
Section 22 of the Value-Added Tax Act will apply in respect of the Pre-commencement Claims
of the General Concurrent Creditors which will be compromised in terms of this
Business Rescue Plan, as provided for in paragraph66.
24. POST-COMMENCEMENT CREDITORS
24.1. Payment of Post-Commencement Creditors
Post-commencement Creditors will be paid by SAA as part of the working capital injection,
failing which they will be paid by the Receivers in accordance with the payment waterfall
provided for in paragraph71.
24.2. Property of the Company available to pay Post-Commencement Claims
As required in terms of section 150 (2) (b) (iv), the Receivership Proceeds, dealt with in
paragraph69, will be available for payment of, inter alia, the Post-commencement Claims.
25. EMPLOYEES
25.1. If the Proposed Restructure is implemented, an agreement with employees, the respective
representatives and the Company will be concluded by means of the Leadership Compact
Forum or the section 189 process will be proceeded with to finality, in terms of which the BRPs
anticipate that approximately 48.17% of the Employees of the Company will be retrenched
and the terms and conditions of employment of the remaining Employees will be revised, along
with the terms of the collective agreements.
25.2. As set out in paragraph60, Government has agreed to fund the payments due to Employees
who have been retrenched.
25.3. As the operations of SAA stabilise and eventually increase it is anticipated that more staff will
be required and on a commercially viable and sustainable basis the Company will employee
more staff, with a preference being given to former SAA employees subject to competence,
skills and suitability.
26. EFFECT OF THE BUSINESS RESCUE PLAN ON THE HOLDERS OF EACH CLASS OF THE
COMPANY'S ISSUED SHARES
As required in terms of section 150 (2) (b) (vii) of the Companies Act, the implementation of the
Proposed Restructure will result in the shares in the Company being transferred to New HoldCo.
27. COMPARISON OF THE BUSINESS RESCUE TO LIQUIDATION
27.1. The following table sets out a comparison of the outcomes that are likely to arise under the
Business Rescue as compared to a liquidation (the liquidation calculation is based on the
information provided in PWC’s liquidation calculation):
Class of creditor
Liquidation Business Rescue
Commencement
Date Publication
Date Proposed Restructure
Secured
Business Rescue / PCF Creditors
N/A N/A
Employees R 32,000 R 32,000
Concurrent creditors
0c 0c
28. RECEIVERSHIP
28.1. On 27 June 2020, the BRPs will file a notice of substantial implementation, thereby
discharging the Company from Business Rescue, subject to the conditions and assumptions
set out in paragraph 75 and 77 being met.
28.2. With effect from the Substantial Implementation Date, the BRPs will be appointed as the
Receivers in order to:
28.2.1. receive the Restructure Proceeds;
28.2.2. make payment to the Pre-Commencement Creditors in accordance with
paragraph 65;
28.2.3. distribute the Restructure Proceeds in accordance with this paragraph; and
28.2.4. make payment to the Lenders in accordance with paragraph64.
28.3. The Restructure Proceeds will be allocated as follows:
28.3.1. firstly, payment of the Receivership Administration Expenses; and
28.3.2. thereafter, payment in accordance with the payment waterfall, which will exclude
the Lenders’ claims and the Pre-commencement Claims of the General
Concurrent Creditors, as more fully dealt with in paragraph 71.
28.4. The Concurrent Allocation will be allocated to payment of the Pre-Commencement Claims of
the General Concurrent Creditors, which will result in the payment of the General Concurrent
Dividend to the General Concurrent Creditors.
28.5. As set out in paragraph66, in return for the right to participate in the Concurrent Allocation,
and with effect from the Substantial Implementation Date:
28.5.1. each General Concurrent Creditor will be deemed to have acceded to the
discharge of the remainder of such General Concurrent Creditor’s Pre-
commencement Claim after payment of the General Concurrent Dividend; and
28.5.2. aside from their rights to claim payment of the General Concurrent Dividend, no
General Concurrent Creditor shall have any Pre-commencement Claim against
the Company from the Substantial Implementation Date.
28.6. The Receivers will have all such powers as may be necessary for them to discharge their
obligations in terms of the Receivership and without in any way restricting the generality of
such powers, the Receivers shall have the following powers and obligations:
28.6.1. to perform all acts and discharge all duties which the Receivers are required to
perform and discharge in order to give effect to the implementation of terms of
the Receivership;
28.6.2. to open and operate banking accounts and investments as if they were trustees
in terms of section 70 (1) of the Insolvency Act, mutatis mutandis;
28.6.3. to admit or reject any Claims tendered for proof as provided for in paragraph [];
28.6.4. to compromise the Claims and defend any proceedings which may be instituted
against the Receivers for the enforcement of Claims disputed by the Receivers;
28.6.5. to abandon to secured Creditors any property held as security at a value agreed
to between the secured Creditor and the Receivers;
28.6.6. to proceed in terms of the Dispute Mechanism or institute any legal proceedings
in their capacities as the Receivers, as they may in their sole discretion deem
appropriate, against any person as may be required to give effect to the
Receivership and to defend any proceedings brought against the Receivers
arising out of the Receivership where the subject matter of the dispute relates to
their powers and obligations in terms of the Receivership; [D/N: Consider
dealing with BR litigation]
28.6.7. to have access to all books, records, documentation and trading figures of the
Company as they may reasonably and properly require for the execution of their
duties as Receivers in terms of the Receivership;
28.6.8. to engage the service of attorneys, advocates, other professional advisers and
service providers in connection with any matter concerning the Receivership,
their functions and duties, to dispense with taxation and to agree on the amount
of their reasonable fees and charges and to pay such fees and disbursements of
such persons out of the monies becoming available to the Receivers in terms of
the Receivership;
28.6.9. to receive any and all amounts payable to them by the Successful Bidder in terms
of the Proposed Transaction and the power to disburse all such amounts to any
relevant person/s and Creditors contemplated in this Proposed Transaction; and
28.6.10. to investigate the Company’s affairs, business, property and financial situation
and take appropriate steps as contemplated in section 141 (1) (c) of the
Companies Act.
28.7. The Receivers will be entitled to charge out their time at the rate of R [] per hour, excluding
VAT.
29. ORDER OF DISTRIBUTION – PAYMENT WATERFALL IN BUSINESS RESCUE & RECEIVERSHIP
29.1. As required in terms of section 150 (2) (b) (v) of the Companies Act, the order of preference
in which proceeds will be applied to pay creditors if the Business Rescue Plan is adopted is
set out below.
29.2. In term of section 135 of the Companies Act, Creditors are to be paid in the following order of
priority (to the extent that there are funds available to pay all categories of Creditors):
29.2.1. The Business Rescue Costs, including but not limited to legal costs, the costs of
the Advisors, operating costs and other costs associated with the
Business Rescue;
29.2.2. Employees for their employment during Business Rescue (to the extent that they
have not been paid for their services during Business Rescue);
29.2.3. Secured PCF Creditors;
29.2.4. Unsecured PCF Creditors; and
29.2.5. Concurrent Creditors.
29.3. In respect of pre-commencement Secured Creditors, their Claims will rank in respect of such
secured asset in priority to all other claims, other than the BRPs’ remuneration and expenses,
as contemplated in section 143 of the Companies Act.
29.4. Subject to what is set out in paragraph64, the Lenders will not participate in any Distributions
out of the Restructure Proceeds and/or the General Allocation.
29.5. Based on the information the BRPs have to date, the General Concurrent Creditors will receive
the General Concurrent Dividend, being R600 million over a three year period, as a result of
the adoption of the Business Rescue Plan, should the General Concurrent Creditors’ claim
increase post the Adoption Date there will be no increase in the amount available for
distribution to General Concurrent Creditors and Concurrent Allocation will be paid to the
General Concurrent Creditors pro rata. For further information relating to this, please refer to
paragraph65.
30. PROOF OF CLAIMS BY CREDITORS
30.1. The exchange rate in respect of all Claims expressed in foreign currency will be determined
as at the Commencement Date.
30.2. General Concurrent Creditors will not be entitled to charge interest on their
Pre-commencement Claims from the Commencement Date.
30.3. Pre-commencement Creditors are required to lodge their Pre-commencement Claims prior to
the Final Claims Date for purposes of participating in the Distribution:
30.3.1. The BRPs or the Receivers, as the case may be, have a discretion as to whether
to allow a Pre-commencement Creditor to lodge any Pre-commencement Claim
after the Final Claims Date; and
30.3.2. Pre-commencement Creditors that have lodged Pre-commencement Claims after
the Final Claims Date, and whose Pre-commencement Claims have been
accepted by the BRPs or the Receivers in the exercise of the BRPs’ or the
Receivers’ aforesaid discretion, forfeit their right to participate in Distributions that
have been made prior to the lodgement of their Pre-commencement Claims.
30.4. Pre-commencement Claims shall be proved to the satisfaction of the BRPs or the Receivers,
as the case may be, and supported by an affidavit. If any Pre-commencement Creditor
requires the affidavit form, please contact Lance Schapiro of Matuson & Associates at
30.5. In the event that the BRPs or the Receivers, as the case may be, dispute a Pre-
commencement Claim or security, such disputed Pre-commencement Claims will be dealt
with in accordance with the Dispute Mechanism more fully dealt with in paragraph78.
31. BENEFITS OF ADOPTING THE BUSINESS RESCUE PLAN COMPARED TO LIQUIDATION
As required in terms of section 150 (2) (b) (vi) of the Companies Act, the benefits to Creditors of
adopting the Business Rescue Plan compared to a liquidation are as follows:
31.1. Continuation of Business
If the Business Rescue proceeds in terms of the Proposed Restructure, the Business will
continue on a solvent basis.
31.2. Quantum
31.2.1. According to the PWC calculation, the dividend that would be received by
Creditors on a liquidation of the Company would be zero cents in the Rand, being
lower than the dividend that is anticipated to be received by Creditors as a result
of Business Rescue.
31.2.2. By way of illustration, please refer to paragraphs 53 and 65 [].
31.3. Timing
31.3.1. Given the complexity of the Company, it is likely that a liquidation would last
longer than 24 months with no ability to pay an interim dividend to concurrent
Creditors. Post-commencement Creditors are likely to only receive their final
dividend after several years. General Concurrent Creditors will not receive a
dividend.
31.3.2. If the Business Rescue proceeds in terms of the Proposed Restructure, General
Concurrent Creditors will receive their first distribution within a year of the
resumption of domestic, regional and international flights.
31.4. Employees
31.4.1. If the Business Rescue proceeds in terms of the Proposed Restructure, the large
number of Employees’ jobs will be saved, on revised terms and conditions.
31.4.2. In a liquidation:
31.4.2.1. all jobs will be lost immediately unless the liquidator agrees to
continue trading against an indemnity. In the current circumstances,
it is highly unlikely that a liquidator would agree to continue trading or
that a liquidator would be indemnified against trading losses;
31.4.2.2. Employees would be entitled to receive a maximum amount of
R32 000.00 (thirty two thousand rand) per staff member, to the extent
that there are funds available; and
31.4.2.3. Employees will only receive payment once the final liquidation and
distribution account has been approved at the end of the liquidation
process which can take up to 24 months.
31.5. Fees
31.5.1. The BRPs submit that the entire costs of the Business Rescue will be significantly
lower than the liquidation costs.
31.5.2. The estimated fees a liquidator would be entitled to in terms of the liquidation
calculation prepared by PWC is approximately R 369 million based on the
realisation of the assets.
31.6. PCF
The BRPs are able to access further PCF for the implementation of the Business Rescue Plan.
32. RISKS OF THE BUSINESS RESCUE
32.1. Notwithstanding what has been stated in this Business Rescue Plan, the Business Rescue
and the amount which Creditors could receive in terms of the Business Rescue may be
adversely affected by, inter alia, the following factors:
32.1.1. the fulfilment of the conditions in terms of the Proposed Restructure taking longer
than expected and/or the Proposed Restructure failing for any reason;
32.1.2. unforeseen litigation of any nature whatsoever, howsoever arising, from any
cause of action whatsoever;
32.1.3. unforeseen damages claims arising from the cancellation of any contracts or
agreements of any nature whatsoever, howsoever arising;
32.1.4. any changes in legislation that impact Business Rescue;
32.1.5. any challenges to this Business Rescue Plan, the rejection thereof or any
amendments thereto;
32.1.6. any regulatory challenges of any nature whatsoever, howsoever arising;
32.1.7. any unforeseen circumstances, outside of the control of the BRPs of any nature
whatsoever howsoever arising that impacts on Business Rescue, including the
consequences of the Coronavirus;
32.1.8. material discrepancies in the information made available to the BRPs by
Management;
32.1.9. market conditions worsen;
32.1.10. Lack of further PCF.
32.2. It should be noted that, in the unlikely event of an immediate liquidation of the Company, the
risks set out in this paragraph 72 would still apply.
33. ASSUMPTIONS MADE WITH REGARD TO FORECAST OF THE BUSINESS RESCUE DIVIDEND
33.1. Due to the COVID-19 pandemic, the aviation industry has been severely affected, to a point
whereby it is impossible to anticipate:
33.1.1. what flying demand will look like in the short, medium and long term;
33.1.2. how many airlines will survive into the period post COVID-19;
33.1.3. what will the restart of flying look like once the travel bans are lifted;
33.1.4. which countries will open their borders for commercial flying in the short, medium
and long term;
33.1.5. what will be the requirements that will have to be complied with as the conditions
of flying;
33.1.6. how will the ticket prices and insurance be affected;
33.1.7. etc.
33.2. Therefore, it is not possible to reliably estimate any financial forecasts for the period post
COVID-19.
33.3. We had worked out the financial forecasts for the sustainable SAA pre-COVID-19 as set out
in [.]. The following assumptions were made at the time:
33.3.1. Revenue:
33.3.1.1. Passenger Revenue related to tickets revenue;
33.3.1.2. Ancillary Revenue relates to ancillary charges related to passenger
travel (e.g. excess baggage, etc);
33.3.1.3. Fuel Surcharge is levied to customers as per the applicable
legislation;
33.3.1.4. Cargo Revenue relates to revenue generated by utilising the belly
space of the passenger aircraft to transport cargo on all the routes;
and
33.3.1.5. Other revenue related to revenue generated from the Voyager loyalty
programme and revenue generated from the Lounges that are
operated in various airports.
33.3.2. Fuel Cost: This is the cost of fuel for operating the flights.
33.3.3. Labour Costs l: These are the total payroll costs (excluding staff allowance).
33.3.4. Maintenance Costs: These are costs that are incurred for the maintenance of the
aircraft fleet.
33.3.5. Other Operating Costs include:
33.3.5.1. inflight entertainment services costs;
33.3.5.2. inflight catering costs;
33.3.5.3. hotel accommodation costs;
33.3.5.4. crew allowances;
33.3.5.5. training costs;
33.3.5.6. etc.
33.3.6. Leasing Costs: This is the costs incurred for rental of the lease aircraft fleet.
_____________________________________________________________________________________
PART C – ASSUMPTIONS AND CONDITIONS
______________________________________________________________________________________
34. CONDITIONS FOR THE BUSINESS RESCUE PLAN TO COME INTO OPERATION AND BE FULLY
IMPLEMENTED
34.1. As required in terms of section 150 (2) (c) (i) (aa) of the Companies Act, the Business Rescue
Plan will come into operation upon the conditions listed below having been fulfilled:
34.1.1. The approval and adoption of the Business Rescue Plan in terms of section 152
of Companies Act;
34.1.2. Approval of the executive authority for the implementation of the Business
Rescue Plan in terms of the PFMA;
34.1.3. An agreement is reached with the employees, their respective Trade Unions and
SAA on the reduction of headcount and revised terms and condition as set out I
paragraph 68;
34.1.4. The requisite funding arrangements as set out in paragraph 60 are finalised
funding is received by no later than 27 June 2020;
34.2. As required in terms of section 150 (2) (c) (i) (bb) of the Companies Act, Substantial
implementation will be deemed to have occurred upon fulfilment of the conditions as set out
in paragraph 77.
35. EFFECT OF THE BUSINESS RESCUE PLAN ON EMPLOYEES
As required in terms of section 150 (2) (c) (ii) of the Companies Act, the effect of the Business Rescue
Plan on Employees is set out in paragraph68.
36. CIRCUMSTANCES IN WHICH THE BUSINESS RESCUE WILL END AND THE DURATION OF
BUSINESS RESCUE
36.1. As required in terms of section 150 (2) (c) (iii) of the Companies Act, the Business Rescue
Plan will end upon the occurrence of one of the events listed in paragraph [].
36.2. In terms of section 132 (2) of the Companies Act, the Business Rescue will end when –
36.2.1. the Business Rescue Plan is:
36.2.1.1. proposed and rejected and the BRPs and Affected Person/s do not
take any action to extend the Business Rescue in any manner
contemplated by the Companies Act; or
36.2.1.2. adopted and implemented (with the conditions fulfilled) and the BRPs
have filed a notice of substantial implementation of the Business
Rescue Plan with the CIPC (i.e. on the Substantial Implementation
Date); or
36.2.2. a High Court orders the conversion of the Business Recue into liquidation
proceedings; or
36.2.3. the BRPs file with the CIPC a notice of termination of the Business Rescue.
37. PROJECTED BALANCE SHEET AND PROJECTED STATEMENT OF INCOME AND EXPENSES
As required in terms of section 150 (2) (c) (iv) of the Companies Act, the projected balance sheet and
statement of income and expenses for the ensuing three years, prepared pre-COVID-19 on the
assumption that Business Rescue Plan is adopted, is attached as Annexure [].
38. EXISTING LITIGATION
All parties who have instituted legal proceedings, including any enforcement action, in respect of any
Pre-commencement Claims against the Company in any forum will be subject to the provisions of
paragraph [], dealing with the proof of Pre-commencement Claims. [D/N: Consider whether we
make provision for the Receivers to continue due to advanced stage of litigation]
39. DISPUTE RESOLUTION
39.1. Reference in this paragraph to BRPs will include a reference to Receivers.
39.2. Subject to paragraph [], save as provided for in section 133 of the Companies Act, in respect
of all or any disputes by the BRPs on Claims, which disputes include, but are not limited to,
disputes on the existence or otherwise of Claim(s), on quantum of Claim(s), security claimed
by a Creditor, the nature of the security, the extent and value of the security and the like
(“dispute”), such dispute may be resolved in accordance with the dispute mechanism outlined
below (“Dispute Mechanism”).
39.3. The Dispute Mechanism procedure will be as follows:
39.3.1. All creditors who have received notification from the BRPs of a dispute are
required within 15 days of receipt of such notice to contact the BRPs and to meet
with the BRPs during this period in an attempt to reach agreement on the dispute
(“Settlement Meeting”).
39.3.2. If the Creditor does not avail itself of this 15 day opportunity, the Creditor will be
deemed to have accepted the BRPs’ position in regard to the dispute
39.3.3. If the Creditor does avail itself of the Settlement Meeting, however, the dispute is
not resolved and the Creditor persists with the dispute, the BRPs and Creditor
must agree to the appointment of a retired judge as an expert (not as an arbitrator
or mediator) to preside over and to resolve the dispute.
39.3.4. Should the BRPs and the Creditor fail to reach an agreement on the expert, then
39.3.5. The appointed expert must endeavour to complete his/her mandate within 30
days of his/her appointment or within such further time period as the expert in
his/her sole discretion may determine.
39.3.6. The expert will in his/her sole and absolute discretion determine:
39.3.6.1. the venue at which the dispute is to be resolved;
39.3.6.2. the rules, regulations and procedures that will govern the
determination of the dispute;
39.3.6.3. the date(s) for the determination of the dispute;
39.3.6.4. will give his award / determination within 5 days of the completion of
the process as determined by him;
39.3.6.5. will as part of his award / determination determine who is liable for
the costs of the determination such costs to include his costs, legal
costs, venue costs, recording equipment (if applicable), transcript of
evidence (if applicable) and the like.
39.3.7. The Creditor/s agree/s that, save for any manifest error the determination of the
expert will be final and binding on the Creditor/s, the Company and the BRPs and
will not be subject to any subsequent review or appeal application / procedure /
process.
39.3.8. The expert shall be entitled to make an award for costs in his/her discretion.
39.3.9. The Creditor, the Employee/s, the Company and the BRPs agree to use their
utmost endeavours to ensure that the entire dispute is determined by the expert
as expeditiously as possible.
39.4. To the extent necessary, should the BRPs be of the view that certain disputes may be settled
or compromised, the BRPs shall be authorised to settle and compromise such a dispute.
39.5. The BRPs may in their sole and absolute discretion decide that the dispute mechanism is not
appropriate for resolving the dispute and/or that the application of the dispute mechanism may
result in prejudice to other Creditors or Employees or the Company. In such event, the
Creditor or Employee concerned shall be entitled in terms of 133 of the Companies Act to refer
the dispute to Court and if an expert has already been nominated, such nomination shall lapse
and be of no further force or effect.
40. ABILITY TO AMEND THE BUSINESS RESCUE PLAN
40.1. Provided that any amendment will not be prejudicial to any of the Affected Persons, the BRPs
shall have the ability, in their sole and absolute discretion, to amend, modify or vary any
provision of this Business Rescue Plan, provided that at all times the BRPs act reasonably.
The amendment will be deemed to take effect on the date of written notice of the amendment
to all Affected Persons.
40.2. It is specifically recorded that the provisions of paragraph [] shall mutatis mutandis apply to
the extension or reduction of any timeframes by the BRPs.
41. SEVERABILITY
Any provision in this Business Rescue Plan which is or may become illegal, invalid or unenforceable
shall be ineffective to the extent of such prohibition or unenforceability and shall be treated pro non
scripto and severed from the balance of this Business Rescue Plan, without invalidating the remaining
provisions of this Business Rescue Plan or affecting the validity or enforceability of such provision in
any other jurisdiction.
42. CONCLUSION
42.1. For the reasons set out above, the BRPs are of the view that if the Business Rescue proceeds
in terms of the Proposed Restructure, same will result in an efficient rescue and recovery of
the Company, in a manner that balances the rights and interests of all relevant stakeholders.
42.2. [D/N: Insert summary of advantages again]
43. BRPS' CERTIFICATE
43.1. We, the undersigned, Siviwe Dongwana and Leslie Matuson, hereby certify to the best of our
knowledge and belief that –
43.1.1. any actual information provided herein appears to be accurate, complete and up
to date;
43.1.2. the BRPs have relied on financial information including opinions and reports
furnished to them by Management and Advisors;
43.1.3. any projections provided are estimates made in good faith on the basis of factual
information and assumptions as set out herein;
43.1.4. in preparing the Business Rescue Plan, the BRPs have not undertaken an audit
of the information provided to them by Management, the Company's auditors and
by the Advisors, although where practical, the BRPs have endeavoured to satisfy
themselves of the accuracy of such information.
___________________________________________
Siviwe Dongwana, in his capacity as the appointed joint
business rescue practitioner (in terms of the Companies Act)
Date: [] 2020
_________________________________________
Leslie Matuson, in his capacity as the appointed joint
business rescue practitioner (in terms of the Companies Act)
Date: [] 2020
Annexure A: List of Material Assets of the Company*
Notes November 2019
ASSETS
Non-Current Assets
Property, Plant and Equipment 1 1 665 752 386
Intangible Assets 38 713 059
Investments in Subsidiaries 2 2 114 961 891
Other Investment 34 500 000
Retirement Benefit Fund -73 004 608
Non-Current Aircraft and Other Deposits 3 1 513 181 675
Total Non-Current Assets 5 294 104 403
Current Assets
Inventories 4 122 940 893
Trade and Other Receivables 5 2 880 252 731
Loan Receivable - SAA Technical 1 129 219 633
Current Aircraft and Other Deposits 6 1 495 783 381
Derivative Financial Assets 1 042 151
Total Current Assets 5 629 238 789
TOTAL ASSETS 10 923 343 192
Notes
1 Property, Plant and Equipment
Land and Buildings 643 043 654
Machinery, Equipment and Furniture 88 441 283
Vehicles and Cabin Loaders 9 868 843
Aircraft and Simulators 892 106 140
Containers 52 533
WIP 32 239 934
Total Property, Plant and Equipment 1 665 752 386
2 Investments in Subsidiaries
SAA Technical 3 160 140 000
Mango 336 305 989
Airchefs 324 149 645
SA Travel Centre 2 000 000
Investments at Cost 3 822 595 634
Less Impairments -1 707 633 743
Net Investment Value 2 114 961 891
3 Non-Current Aircraft and Other Deposits
Amex Security Deposit 390 861 962
IATA Security Deposit 293 412 000
Other Cash Deposits 828 907 715
Total Non-Current Aircraft and Other Deposits 1 513 181 677
4 Inventories
Inflight Stock 68 928 118
Fuel Stock 38 582 917
Corporate Clothing & Other 15 429 858
Total Inventories 122 940 893
5 Trade and Other Receivables
Net Trade Debtors 2 505 294 468
Prepayments 255 540 879
Security Deposits 25 830 574
Other Receivables 93 586 809
Total Trade and Other Receivables 2 880 252 731
6 Current Aircraft and Other Deposits
Maintenance Reserve 1 485 807 373
Cargo Security Deposits 9 976 008
Total Current Aircraft and Other Deposits 1 495 783 381
* None of the assets were held as security by Creditors at the Commencement Date.
Disclaimer
* The above is an extract from the 30 November 2019 Managements Accounts.
* The Management Accounts have not been consolidated and relate to the Company only.
* The Management Accounts are draft, unaudited and are presented for illustrative purposes only.
* These Management Accounts should not be relied on for any other purpose whatsoever.
Annexure B: [List of creditors]
Annexure C: Steps Plan
Annexure D:
Projected statement of Income and Expenses
Restructured Base Case
Year Counter: 1 2 3 4 5 6 7
Passenger Revenue
13 532 803 682
11 774 364 955
10 788 275 175
13 127 828 255
13 332 885 727
13 596 033 195
13 871 079 549
Ancillary Revenue
464 110 805
425 121 078
295 738 273
443 075 186
588 424 736
781 308 332
1 037 573 084
Fuel Surcharge
4 923 754 735
4 951 095 209
3 223 642 864
3 259 454 630
3 086 847 433
3 086 847 433
3 086 847 433
SAAT Revenue - - - - - - - Cargo Revenue
520 420 581
516 158 631
645 417 129
654 394 649
654 394 649
654 394 649
654 394 649
Air Chefs Revenue - - - - - - - Voyager Revenue - - - - - - -
Other Revenue
1 438 638 263
1 308 585 108
1 186 710 269
1 444 061 108
1 466 617 430
1 495 563 651
1 525 818 750
Total Revenue
20 879 728 066
18 975 324 981
16 139 783 710
18 928 813 828
19 129 169 975
19 614 147 260
20 175 713 464
Fuel Cost
(6 987 126
475)
(6 405 848
466)
(4 190 350
593)
(4 259 456
750)
(4 033 893
588)
(4 033 893
588)
(4 033 893
588)
Labour Cost
(4 287 791
034)
(3 888 722
362)
(2 593 189
478)
(2 161 446
083)
(2 251 800
803)
(2 346 673
259)
(2 446 289
338)
Maintenance Cost
(4 065 174
798)
(3 730 110
741)
(2 738 950
603)
(2 802 018
829)
(3 065 062
921)
(3 084 483
528)
(3 446 998
894)
Other Operating Costs
(8 545 360
614)
(8 034 285
911)
(6 111 260
116)
(6 919 201
014)
(7 080 847
530)
(7 264 852
621)
(7 461 175
603)
Total Operating Costs
(23 885 452
921)
(22 058 967
481)
(15 633 750
790)
(16 142 122
676)
(16 431 604
843)
(16 729 902
996)
(17 388 357
424)
EBITDAR
(3 005 724
855)
(3 083 642
500) 506 032
920 2 786
691 152 2 697
565 132 2 884
244 264 2 787
356 041 EBITDAR Margin -22% -26% 5% 21% 20% 21% 20%
Leasing Costs
(2 840 926
769)
(2 833 239
538)
(2 244 275
193)
(2 236 713
619)
(2 223 102
785)
(2 200 464
785)
(2 198 406
785)
EBITDA
(5 846 651
625)
(5 916 882
038)
(1 738 242
273) 549 977
533 474 462
346 683 779
479 588 949
255 EBITDA Margin -43% -50% -16% 4% 4% 5% 4%
Depreciation
(946 781
680)
(716 204
046)
(113 083
540)
(172 728
391)
(211 005
322)
(212 484
322)
(213 963
322)
Profit on Sale of Fixed Assets
(726 371)
(1 324 275)
(896 712
990) - - - -
Financing Costs
(1 337 380
650)
(877 337
691)
(215 906
975) (71 628
584) (12 300
262) (0) (0)
Exceptional and one off costs - -
(1 312 991
919) - - - -
Total Other Costs
(2 284 888
700)
(1 594 866
012)
(2 538 695
424)
(244 356
974)
(223 305
584)
(212 484
322)
(213 963
322)
EBIT
(8 131 540
325)
(7 511 748
050)
(4 276 937
697) 305 620
559 251 156
763 471 295
157 374 985
933
EBIT Margin -60% -64% -40% 2% 2% 3% 3%
ASSUMPTIONS Number of Passengers
4 622 518
3 760 298
1 965 102
2 332 888
2 380 782
2 431 893
2 486 433
Number of Flights 51 209 45 027 19 127 18 973 18 973 18 973 18 973 Number of Aircraft 40 43 22 22 22 21 21 Number of Flights per Aircraft 1 252 1 118 829 862 862 900 903 Revenue Passenger Kilometres
16 427 811 722
13 698 819 368
8 449 732 203
9 807 854 660
10 011 669 116
10 220 118 427
10 435 493 055
Available Seat Kilometres
21 623 128 918
20 653 530 088
16 296 029 160
16 584 237 960
16 584 237 960
16 584 237 960
16 584 237 960
Load Factor 76% 66% 52% 59% 60% 62% 63%
Block Hours 136 504 126 938 79 314 78 736 78 736 78 736 78 736
Average Fare 2 928 3 131 5 490 5 627 5 600 5 591 5 579 Average Revenue per PAX 4 517 5 046 8 213 8 114 8 035 8 065 8 114 Revenue per ASK 1 1 1 1 1 1 1
Headcount 4 747 2 539 2 539 2 539 2 539 2 539 2 539
Projected Cash Flow forecast
Projected Balance Sheet
Aircraft owner Registration Status
Air Lease Corporation ZS-SFG Suspended and lease termination in progress
Castlelake (Wilmington) ZS-SFJ Suspended and lease termination in progress
Castlelake (Wilmington) ZS-SFK Suspended and lease termination in progress
Marlborough Finance No. 2 DAC ZS-SFH Suspended and lease termination in progress
Genesis (GASL Ireland Leasing 6 Limited) ZS-SFM Suspended and lease termination in progress
Stellar Aircraft Holding 2 Limited/ DVB ZS-SFI Suspended and lease termination in progress
Castlelake (Wilmington) ZS-SFL Suspended and lease termination in progress
GY Aviation Lease 1501 Co LTD. (CDB) ZS-SZA
Lease agreements and Rental reduction negotiated,
Amendment and finalisation of lease agreements
suspended, until clarity on future of SAA.
GECAS- Celestial Aviation Trading 68 LTD ZS-SZB
GECAS- Celestial Aviation Trading 68 LTD ZS-SZC
GECAS- Celestial Aviation Trading 68 LTD ZS-SZD
Limpopo Aviation Leasing /Goshawk Management (Ireland) Limited ZS-SZE
Oriental Leasing 7 Company Limited (CMB) ZS-SZF
Pembroke Aircraft Leasing 6 Limited (Standard Chartered Bank) ZS-SZG
Oriental Leasing 7 Company Limited (CMB) ZS-SZH
Zimbani Aviation Leasing Limited /Goshawk Management (Ireland)
Limited
ZS-SZI
LETABA AVIATION LEASING LIMITED/Goshawk Management (Ireland)
Limited
ZS-SZJ
Natixis ZS-SXA Suspended and lease termination in progress
Natixis ZS-SXB Suspended and lease termination in progress
Natixis ZS-SXC Suspended and lease termination in progress
Aercap ZS-SNE Aircraft returned and lease termination concluded
Aercap ZS-SNH Aircraft returned and lease termination concluded
Aercap ZS-SNI Aircraft returned and lease termination concluded
AirCastle Lease (ThunderBird 1 Leasing Ltd.) ZS-SXZ Aircraft returned and lease termination in progress
AirCastle Lease (ThunderBird 2 Leasing Ltd.) ZS-SXY Aircraft returned and lease termination in progress
AirCastle Lease (ThunderBird 3 Leasing Ltd.) ZS-SXX Aircraft returned and lease termination in progress
AirCastle Lease (ThunderBird 4 Leasing Ltd.) ZS-SXW Aircraft returned and lease termination in progress
(Tokyo Century) TC-Skyward Aviation Ireland Ltd. Technical now
managed by Aviation Capital Group.
ZS-SXV Aircraft returned and lease termination in progress
C.I.T. Aerospace International (Avolon) ZS-SXU Suspended and lease termination in progress
Oriental Leasing 11 Company Limited (CMB) ZS-SXI
Lease agreements and Rental reduction negotiated,
Amendment and finalisation of lease agreements
suspended, until clarity on future of SAA.
Athena4 Aviation Leasing Limited ZS-SXJ
Oriental Leasing 12 Company Limited (CMB) ZS-SXK
AC Finance MSN1779 Limited ZS-SXL
Metal 2017-1 Leasing XV Limited (Aergo Capital Holdings) ZS-SXM
GECAS ZS-SBA End of Lease
GECAS ZS-SBB End of Lease
Hainan Airlines / Avolon ZS-SDC
Dependant on the future route network of the airline
Hainan Airlines / Avolon ZS-SDD
Air Mauritius ZS-SDE
Air Mauritius ZS-SDF
Provision for CP for new Guarantee ifo receivership Government must settle interest at end upon presentation of certificate by receiver at the end.
